Financial statement reporting of accounts receivable:

Accounts receivable are reported as current assets on the balance sheet as follows.
 

Christopher Corporation
Balance Sheet
September 30

Assets

 

 

Current Assets

 

 

     Cash and Cash Equivalents

 

$10,000

     Accounts Receivable

$67,000

 

     Less: Allowance for Uncollectible Accounts

17,000

50,000

     Merchandise Inventory

 

270,000

Total Current Assets

 

$330,000

Property, Plant, and Equipment

 

 

     Land

 

$70,000

     Buildings

 

220,000

     Machinery and Equipment

 

340,000

Total Property, Plant, and Equipment

 

$630,000

Other Assets

 

10,000

Total Assets

 

$970,000

 

 

 

Liabilities and Stockholders' Equity

 

 

Liabilities

 

 

Current Liabilities

 

 

     Accounts Payable

 

$135,000

     Income Taxes Payable

 

25,000

     Wages Payable

 

10,000

Total Current Liabilities

 

$170,000

Long-term Liabilities

 

340,000

Total Liabilities

 

$510,000

 

 

 

Stockholders' Equity

 

 

Common Stock

 

$350,000

Retained Earnings

 

110,000

Total Stockholders' Equity

 

$460,000

Total Liabilities and Stockholders' Equity

 

$970,000

The Christopher Corporation's balance sheet shows accounts receivable of $67,000 and a $17,000 allowance for uncollectible accounts. The accounts receivable balance means the company's customers owe it $67,000. The allowance for uncollectible accounts balance means the company expects to be unable to collect $17,000 from its customers. As a result, the company expects to be able to collect $50,000 ($67,000 - $17,000) from its customers. It is this $50,000 expected cash receipts that the company's management would use in planning its future cash expenditures.

On the income statement, several accounts affected by accounts receivable are reported, as shown below. Net sales include cash sales and credit sales less sales returns and allowances resulting from products sold being returned by customers. Finally, the uncollectible accounts expense is reported as an operating expense.
 

Christopher Corporation
Income Statement
For the Month Ended September 30

Net Sales

$600,000

Cost of Goods Sold

360,000

Gross Profit

$240,000

Operating Expenses

 

     Supplies Expense

$13,000

     Wages Expense

131,000

     Insurance Expense

15,000

     Rent Expense

24,000

     Uncollectible Accounts Expense

12,000

Total Operating Expenses

$195,000

Operating Income

$45,000

Other Revenues and (Expenses)

1,000

Income Before Taxes

$46,000

Income Taxes Expense

16,000

Net Income

$30,000


 

** You now have the background to do text exercises 7.8 and 7.10 and problems 7.1 and 7.2.
 

Financial Reporting Summary

The following table summarizes the relationships among the major topics examined in this and previous chapters. The numbers in parentheses refer to the chapters in which the topics were discussed.
 

Resources

=

Sources of Resources

Assets

=

Liabilities

+

Stockholders' Equity

Current Assets
  Cash and cash equivalents (6)
  Accounts receivable (7)

 

 

 

Revenues
  Sales (7)
  Sales returns & allowances (7)
Operating Expenses
  Bank service expense (6)
  Uncollectible accounts expense (7)
Other Revenues & Expenses
  Interest revenue (6)
  Interest expense (6)

 

 

 

Previous section