Accounts Receivable: Financial Accounting and Auditing (Portfolio 5110)

  • This Portfolio explains and analyzes financial accounting and auditing of accounts receivable and associated items.


This Portfolio comprehensively explains and analyzes financial accounting and auditing of accounts receivable and associated items. Most enterprises that sell goods or provide services do not instantaneously collect amounts due from customers. Consequently, most enterprises need to understand how to value, record, and present accounts receivable in their financial statements.

After Section I of the Portfolio, which imparts fundamental principles concerning accounts receivable, Section II explains how to value and present accounts receivable on balance sheets. The section analyzes both accounts receivable and allowances for doubtful accounts. Section II also addresses barter transactions and various other issues that affect accounts receivable.

Section III focuses on bad debt expense and the allowance for doubtful accounts.

Section IV explains how to calculate interest on accounts receivable. It distinguishes implicit interest from explicit interest and also explains how to evaluate the materiality of implicit interest expense.

Section V discusses disclosure practices and provides examples.

Section VI explores the relationship between accounts receivable and accounting for income taxes under FASB Accounting Standards Codification (ASC) Topic 840, as based on FASB Statement No. 109, Accounting for Income Taxes. However, readers seeking broader coverage of accounting for income taxes should consult either Bloomberg Tax and Accounting Portfolio 5000-4th, Ernst & Young LLP, Accounting for Income Taxes: FAS 109, or Bloomberg Tax Portfolio 5001, Howell & Walther, Accounting for Income Taxes: Fundamental Principles and Special Topics.

Sections VII and VIII, respectively, explore two common transactions involving accounts receivable: factoring and securitizing.

The Portfolio’s final two sections augment the preceding discussions of financial accounting practices. Section IX explains how auditors test and evaluate accounts receivable. Section X surveys SEC enforcement activity related to accounts receivable.

This Portfolio may be cited as Bloomberg Tax Portfolio 5110, Howe and Mitschow, Accounts Receivable: Financial Accounting and Auditing (Accounting Policy and Practice Series).

Table of Contents

I. Fundamental Principles and Scope of Portfolio
II. Valuation and Presentation of Accounts Receivable
III. Bad Debt Expense and the Allowance for Doubtful Accounts
IV. Interest on Accounts Receivable
V. Disclosure Practices and Examples
VI. AR and Accounting for Income Taxes
VII. Factoring of Accounts Receivable
VIII. Securitization of Accounts Receivable
IX. Audit Issues Related to AR
X. SEC Enforcement Activity Related to AR

Harry Howe
Professor and Coordinator of Accounting Program
Suny Geneseo
Mark Mitschow
Professor of Accounting
SUNY Geneseo
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