Question

Provide an original example of a transaction and then identify the type receivable—accounts receivable, a note receivable, or other receivables.

Answer 1

Transaction - Goods sold on credit to customers of $100 with the credit terms 2/10 net 30 (which means the actual credit period given to customers is 30 days and if the amount is paid with in 10 days 2 % discount will be provided)

There are 2 methods to account for accounts receivable.

1. Gross method - accounts receivable will be recorded at $100 assuming that discount will not be taken

2. Net method - accounts receivable will be recorded at $98 assuming that discount will be taken.