The chapter on cash and receivables has been a fairly understandable topic. Throughout the chapter, one learns about cash, receivables notes receivables, valuation of accounts receivables, and other issues such as presentation and analysis. Although I have understood most of these topics, two main topics still pause a challenge to me. I find it difficult to understand the recognition and valuation of notes receivable and the different types of discounts. I find the recognition and valuation of notes receivable challenging, especially when it comes to calculating the value of the note. I also find that distinguishing between trade discounts and cash discounts is a bit challenging for me.
Fortunately, I have been able to find supplemental resources and websites that better explain these challenging concepts. I found a website (Money-zine.com) that has helped me better understand the concepts behind the recognition of notes receivables. The website defines and explains the topic and provides the rules that must be met for both short-term and long-term notes (Money-zine.com, 2020). I also found a YouTube video that provided out step-by-step calculations for notes receivable and explained them as always having interest per annum regardless of the duration of the note (Accounting Videos, 2015).
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I also found a YouTube video that helped me better distinguish between trade discounts and cash discounts. I now fully understand the main differences between the two. Trade discounts are the reductions done at fixed percentages by whole sellers to retailers on purchases and are not required to be recorded separately (Kabra, 2012). In contrast, cash discounts are given to customers when they pay immediately or within a fixed period and are required to be recorded separately in the accounting books (Kabra, 2012). I found the explanation from the website to be easily understandable; thus, the concepts are no longer challenging to me.
References
Accounting Videos. (2015). Notes receivable. https://www.youtube.com/watch?v=Q_5lOCTo4qc
Kabra, R. (2012). IGCSE accounting -Trade discount and cash discount. https://www.youtube.com/watch?v=ok-MB7t5pNU
Money-zine.com. (2020). Recognition of notes receivable. https://www.money-zine.com/definitions/investing-dictionary/recognition-of-notes-receivable/#:~:text=Notes%20receivable%20are%20oftentimes%20accepted, which%20a%20receivable%20is%20repaid.&text=If%20the%20rate%20of%20interest%20is%20lower%20than%20the%20market,the%20discount%20provided%20the%20customer. .
