Internal Control Procedures for Accounts Receivable

Internal controls for accounts receivable are used to reduce the risk of fraud and error in the accounts receivable process. The purpose of the accounts receivable internal control checklist is to ensure that valid sales invoices are properly recorded and that customers pay promptly.

Last modified December 17th, 2019 by Michael Brown
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Accounts Receivable Control Account

The accounts receivable control account is an account in the general ledger which maintains summary postings relating to accounts receivables. The account, which is sometimes referred to as the sales ledger control account, is used to allow the detail of customer transactions to be kept in a separate subsidiary personal account ledger which is not part of the double entry bookkeeping system.

Last modified July 16th, 2019 by Michael Brown
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Contra Entry Journal

A business has a balance due from a customer on its accounts receivable ledger, but also owes the customers business an amount on its accounts payable ledger for goods supplied. A contra entry is used to offset the two amounts, leaving a net amount outstanding to the customer.

Last modified November 12th, 2019 by Michael Brown
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Chain Discount Calculator

The chain discount calculator works out a products net price after applying multiple trade discounts to its list price. This free Excel calculator also provides a summary showing the original price, total discount, and net price, together with a calculation of the single equivalent rate (SED).

Last modified July 16th, 2019 by Michael Brown
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Chain Discounts in Accounting

Chain discounts are sometimes called multiple discounts, and refer to a of discounts which are applied to an original selling price (list price) to arrive at a net sales price. The discounts are applied in sequence and are calculated using the series discount formula.

Last modified November 13th, 2019 by Michael Brown
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Allowance Method for Uncollectible Accounts

The allowance for uncollectible accounts method is used to estimate the bad debt expense required to reflect uncollectible accounts receivable at the end of an accounting period. The method complies with the matching principle and for this reason is preferred over the direct write off method.

Last modified December 19th, 2019 by Michael Brown
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Direct Write-off Method

The direct write-off method of accounting for uncollectible accounts is used to remove specific uncollectible amounts from the accounts receivable balance when they are identified. This debt write off method does not comply with the matching principle and can only be used for immaterial amounts.

Last modified March 13th, 2020 by Michael Brown
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Cost of Trade Credit Calculator

This free Excel cost of trade credit calculator can be used to calculate the annualized cost of offering early payment discounts to customers or alternatively of not taking early payment discounts from suppliers.

Last modified January 17th, 2020 by Michael Brown
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Trade Discount

As a trade discount is deducted before any exchange takes place with the customer, it does not form part of the accounting transaction, and is not entered into the accounting records of the business.

Last modified November 23rd, 2022 by Michael Brown
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Bad Debt Recovery – Allowance Method

A business had previously written off a bad debt of 2,000 using the allowance method for bad debts, but has now managed to make a bad debt recovery and has received 900 in part payment of the account.

Last modified August 9th, 2019 by Michael Brown
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Allowance Method For Bad Debt

A business uses the allowance method when accounting for bad debt, and has decided that a debt from a customer of 2,000 is not recoverable and needs to be recorded as a bad debt.

Last modified August 9th, 2019 by Michael Brown
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Allowance for Doubtful Accounts

A customer has been invoiced a total of 5,000 for goods and the business has decided that there is doubt as to whether the customer can pay in full. They have decided to adjust the allowance for doubtful accounts provision by 500 in respect of the accounts receivable balance of 5,000.

Last modified January 26th, 2023 by Michael Brown
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