We will discuss receivables, focusing on accounts receivable and notes receivable, reviewing the accounts receivable cycle, the journal entries for recording accounts receivable, and related subsidiary ledgers.

We will discuss bad debt and valuing of accounts receivable using two methods, the allowance method and the direct write off method. The accounts receivable account represents money owed to the company but there will be times when the company cannot collect on the account receivables. Under the direct write off method, we write off the accounts receivable as we determine they are not collectible. The direct write off method does not do a good job of representing the accounts receivable account's true value and does not do a good job of conforming to the matching principle, matching up expenses with the related revenue it was used to generate.

The allowance method does a better job of valuing accounts receivable and conforming to the matching principle and is the method preferred. The allowance method is more complex, however, and requires the use of estimates. We will also discuss notes receivable, the journal entry for recording notes receivable, and for receiving payment on a note receivable. We will cover detailed methods for calculating simple interest.