Table of contents

1. Introduction to Accounting1h 21m

Welcome!
1m

Types of Accounting
4m

Business Organization
6m

Useful Information
14m

Fundamental Accounting Equation
15m

The Financial Statements
27m

Sample Financial Statements - Coca Cola
12m

2. Transaction Analysis1h 13m

Journal Entries: Debits and Credits
10m

Accounting Flow Intuition: BASE Formula
13m

Journal Entries: Business Formation Example
30m

Trial Balance
12m

Classified Balance Sheet Components
6m

3. Accrual Accounting Concepts2h 38m

Accrual Accounting vs. Cash Basis Accounting
10m

Revenue Recognition and Expense Recognition
24m

Introduction to Adjusting Journal Entries and Prepaid Expenses
36m

Adjusting Entries: Supplies
12m

Adjusting Entries: Unearned Revenue
11m

Adjusting Entries: Accrued Expenses
12m

Adjusting Entries: Accrued Revenues
6m

Adjusting Entries: Depreciation
16m

Summary of Adjusting Entries
7m

Unadjusted vs Adjusted Trial Balance
6m

Closing Entries
10m

Post-Closing Trial Balance
2m

4. Merchandising Operations2h 30m

Service Company vs. Merchandising Company
10m

Net Sales
28m

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
9m

Perpetual Inventory - Purchases
10m

Perpetual Inventory - Freight Costs
9m

Perpetual Inventory - Purchase Discounts
11m

Perpetual Inventory - Purchasing Summary
6m

Periodic Inventory - Purchases
14m

Periodic Inventory - Freight Costs
7m

Periodic Inventory - Purchase Discounts
10m

Periodic Inventory - Purchasing Summary
6m

Single-step Income Statement
4m

Multi-step Income Statement
17m

Comprehensive Income
2m

5. Inventory1h 55m

Merchandising Company vs. Manufacturing Company
6m

Physical Inventory Count, Ownership of Goods, and Consigned Goods
10m

Specific Identification
7m

Periodic Inventory - FIFO, LIFO, and Average Cost
23m

Perpetual Inventory - FIFO, LIFO, and Average Cost
31m

Financial Statement Effects of Inventory Costing Methods
10m

Lower of Cost or Market
11m

Inventory Errors
14m

6. Internal Controls and Reporting Cash1h 16m

Fraud and the Fraud Triangle
4m

Sarbanes-Oxley Act
6m

Five Components of Internal Controls
8m

Principles of Control Activities
8m

Limitations of Internal Controls
3m

Petty Cash
12m

Bank Reconciliation
21m

Journal Entries for Bank Reconciliation
11m

7. Receivables and Investments3h 8m

Types of Receivables
8m

Net Accounts Receivable: Direct Write-off Method
5m

Net Accounts Receivable: Allowance for Doubtful Accounts
13m

Net Accounts Receivable: Percentage of Sales Method
9m

Net Accounts Receivable: Aging of Receivables Method
11m

Notes Receivable
25m

Introduction to Investments in Securities
13m

Trading Securities
31m

Available-for-Sale (AFS) Securities
26m

Held-to-Maturity (HTM) Securities
17m

Equity Method
25m

8. Long Lived Assets5h 2m

Initial Cost of Long Lived Assets
42m

Basket (Lump-sum) Purchases
13m

Ordinary Repairs vs. Capital Improvements
10m

Depreciation: Straight Line
32m

Depreciation: Declining Balance
29m

Depreciation: Units-of-Activity
28m

Depreciation: Summary of Main Methods
8m

Depreciation for Partial Years
13m

Retirement of Plant Assets (No Proceeds)
14m

Sale of Plant Assets
18m

Change in Estimate: Depreciation
21m

Intangible Assets and Amortization
17m

Natural Resources and Depletion
16m

Asset Impairments
16m

Exchange for Similar Assets
16m

9. Current Liabilities2h 19m

Types of Liabilities
8m

Notes Payable
26m

Payroll and Payroll Taxes
24m

Sales Tax Payable
26m

Current Portion of Long Term Debt
19m

Contingent Liabilities
10m

Estimated Liabilities: Warranties
23m

10. Time Value of Money1h 23m

Time Value of Money Equations
35m

Using Time Value of Money Tables
47m

11. Long Term Liabilities2h 45m

Introduction to Bonds and Bond Characteristics
15m

Face Value Bonds
17m

Discount on Bonds
28m

Premium on Bonds
25m

Zero Coupon Bonds
11m

Straight Line Amortization of Bond Premium or Discount
18m

Effective Interest Amortization of Bond Premium or Discount
35m

Redeeming Bonds before Maturity
13m

12. Stockholders' Equity2h 15m

Characteristics of a Corporation
17m

Shares Authorized, Issued, and Outstanding
9m

Issuing Par Value Stock
12m

Issuing No Par Value Stock
5m

Issuing Common Stock for Assets or Services
8m

Retained Earnings
14m

Retained Earnings: Prior Period Adjustments
9m

Preferred Stock
11m

Treasury Stock
9m

Dividends and Dividend Preferences
17m

Stock Dividends
10m

Stock Splits
9m

13. Statement of Cash Flows2h 24m

Introduction to the Statement of Cash Flows
14m

Operating Activities: Indirect Method
36m

Operating Activities: Direct Method
29m

Investing Activities
35m

Financing Activities
24m

Significant Noncash Activities
5m

14. Financial Statement Analysis5h 25m

Horizontal Analysis
14m

Vertical Analysis
23m

Common-sized Statements
5m

Trend Percentages
7m

Discontinued Operations and Extraordinary Items
6m

Introduction to Ratios
8m

Ratios: Earnings Per Share (EPS)
10m

Ratios: Working Capital and the Current Ratio
14m

Ratios: Quick (Acid Test) Ratio
12m

Ratios: Gross Profit Rate
9m

Ratios: Profit Margin
7m

Ratios: Quality of Earnings Ratio
8m

Ratios: Inventory Turnover
10m

Ratios: Average Days in Inventory
9m

Ratios: Accounts Receivable (AR) Turnover
9m

Ratios: Average Collection Period (Days Sales Outstanding)
8m

Ratios: Return on Assets (ROA)
8m

Ratios: Total Asset Turnover
5m

Ratios: Fixed Asset Turnover
5m

Ratios: Profit Margin x Asset Turnover = Return On Assets
9m

Ratios: Accounts Payable Turnover
6m

Ratios: Days Payable Outstanding (DPO)
8m

Ratios: Times Interest Earned (TIE)
7m

Ratios: Debt to Asset Ratio
5m

Ratios: Debt to Equity Ratio
5m

Ratios: Payout Ratio
5m

Ratios: Dividend Yield Ratio
7m

Ratios: Return on Equity (ROE)
10m

Ratios: DuPont Model for Return on Equity (ROE)
20m

Ratios: Free Cash Flow
10m

Ratios: Price-Earnings Ratio (PE Ratio)
7m

Ratios: Book Value per Share of Common Stock
7m

Ratios: Cash to Monthly Cash Expenses
8m

Ratios: Cash Return on Assets
7m

Ratios: Economic Return from Investing
6m

Ratios: Capital Acquisition Ratio
6m

15. GAAP vs IFRS56m

GAAP vs. IFRS: Introduction
7m

GAAP vs. IFRS: Classified Balance Sheet
6m

GAAP vs. IFRS: Recording Differences
4m

GAAP vs. IFRS: Adjusting Entries
4m

GAAP vs. IFRS: Merchandising
3m

GAAP vs. IFRS: Inventory
3m

GAAP vs. IFRS: Fraud, Internal Controls, and Cash
3m

GAAP vs. IFRS: Receivables
2m

GAAP vs. IFRS: Long Lived Assets
5m

GAAP vs. IFRS: Liabilities
3m

GAAP vs. IFRS: Stockholders' Equity
3m

GAAP vs. IFRS: Statement of Cash Flows
5m

GAAP vs. IFRS: Analysis and Income Statement Presentation
5m

7. Receivables and Investments

Net Accounts Receivable: Percentage of Sales Method

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Percentage of Sales Method

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Multiple Choice

Under the percentage of sales method for estimating bad debts, which of the following best describes how net accounts receivable is determined at the end of the period?

Net accounts receivable equals accounts receivable plus the estimated bad debt expense.

Net accounts receivable equals accounts receivable minus the allowance for doubtful accounts calculated as a percentage of ending accounts receivable.

Net accounts receivable equals accounts receivable minus the actual write-offs during the period.

Net accounts receivable equals accounts receivable minus the estimated bad debt expense based on a percentage of sales.

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Verified step by step guidance

Understand the concept of net accounts receivable: Net accounts receivable represents the amount of accounts receivable that a company expects to collect after accounting for potential bad debts.

Review the percentage of sales method: This method estimates bad debt expense as a percentage of total sales during the period. The estimated bad debt expense is recorded as an adjustment to the allowance for doubtful accounts.

Determine the relationship between accounts receivable and bad debt expense: Net accounts receivable is calculated by subtracting the estimated bad debt expense (based on the percentage of sales) from the total accounts receivable balance.

Clarify why other options are incorrect: For example, net accounts receivable is not calculated by adding bad debt expense to accounts receivable, nor is it determined by subtracting actual write-offs during the period. These methods do not align with the percentage of sales approach.

Conclude with the correct calculation: Net accounts receivable equals accounts receivable minus the estimated bad debt expense, which is derived from applying the percentage of sales method.