Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Cost Accounting Expert

These are amounts owed to the company through debtors. This is the purpose why we also utilize the term sundry debtors to indicate the amounts owed to the firm. This signifies amounts generally arising out of normal commercial transactions. Or we can say, 'accounts receivable' or sundry debtors represent unpaid customer accounts. Inside the balance sheet explanations these represent amounts owed to the firm through customers on the balance sheet date. Such are also called as trade receivables, as they arise out of normal trading transactions. Trade receivables occur directly from credit sales and as provide significant information for management and outsiders. In most conditions these accounts are unsecured and contain only the personal security of the customer.

This is normal that several of these accounts default and turn into uncollectable. These collection losses are termed as bad debts. This is impossible for the management to identify exactly that accounts and what amount will not be collected. But, depends on past experience, this is possible for the management to estimate the loss on the sundry or receivable debtors like a whole. Such estimates decrease the gross value of accounts receivable to their estimated realizable value. For illustration:

Accounts Receivable                                                                                       7,50,000

Less: Estimated collection loss at 10%                                                             75,000

Net realisable value of accounts receivable                                                   6,75,000

The estimated collection loss is variously considered to as provision for uncertain debts, provision for bad provision or debts for collection losses.

This is a usual practice for debts to be evidenced by formal written promises to pay or acceptance of an order to pay. Such formal documentary debts represent Promissory Notes, Receivable or Bills Receivable. Such instruments used in trade are negotiable instruments and therefore allow the trader to assign any of his or her receivables to the other party or a bank for realizing immediate liquidity.

This is also usual for accounts receivables to be pledged or assigned mainly to banks against short-term credits in the type of cash credits or overdrafts.

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M9617215

Have any Question?


Related Questions in Cost Accounting

Assignment1 based on your topic given by your lecturer

Assignment: 1. Based on your topic given by your Lecturer, select two research-based journal articles relating to your topic. The articles you choose must cover a contemporary issue that is relevant to your topic. The jo ...

Research and write a paper on the topicthe ethics of

Research and write a paper on the Topic: The Ethics of manipulating budgets The paper should be approximately 3-4 double spaced written pages, plus your reference page (at least four references required) and any appendic ...

Assignment - the effect of customer service experience on

Assignment - The Effect of Customer Service Experience on Subsequent Purchase Decisions One of our core topics this term will be to examine how management decisions affect sales volume and, therefore, company profits. Tw ...

The balanced scorecard can be described as a tool that

The Balanced Scorecard can be described as a tool that "translates an organisation's mission and strategy into a set of performance measures that provide the framework for implementing its strategy" (Horgren et al., 2014 ...

Assessment taskselect two public limited companies listed

Assessment task Select two public limited companies listed on the Australian Securities Exchange (ASX) that are in the same industry. Go to the website of your selected companies. Then go to the Investor Relations sectio ...

Assessment taskselect two public limited companies listed

Assessment task Select two public limited companies listed on the Australian Securities Exchange (ASX) that are in the same industry. Go to the website of your selected companies. Then go to the Investor Relations sectio ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As