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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-3 Accounts Receivable Turnover Ratio Accounts receivable turnover ratio Average number.

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Presentation on theme: "CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-3 Accounts Receivable Turnover Ratio Accounts receivable turnover ratio Average number."— Presentation transcript:

1 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-3 Accounts Receivable Turnover Ratio Accounts receivable turnover ratio Average number of days for payment

2 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 7 Objectives Accounting for Uncollectible Accounts After studying Chapter 7, you will be able to: Define accounting terms related to uncollectible accounts. Identify accounting concepts and practices related to uncollectible accounts. Calculate and record estimated uncollectible accounts expense using the direct write-off method. Calculate and record estimated uncollectible accounts expense using the allowance method. Calculate and analyze accounts receivable turnover ratios. 2 LESSON 7-2

3 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Lesson 7-3 accounts receivable turnover ratio: the number of times the average amount of accounts receivable is collected during a specified period book value of accounts receivable: the difference between the balance of accounts receivable and its contra account, allowance for uncollectible accounts 3 LESSON 7-3

4 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 7-3 Beginning$50,329.14$1,416.83$48,912.31–= Ending$45,462.79$1,363.88$44,098.91–= Total Accounts Receivable Allowance for Uncollectible Accounts Book Value of Accounts Receivable –= CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIO page 211 Compute the beginning and ending book value.1

5 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 7-3 ($48,912.31$44,098.91)$46,505.61 +=  2 Beginning Book Value of Accounts Receivable Ending Book Value of Accounts Receivable Average Book Value of Accounts Receivable +=  2 CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIO page 211 Compute the average book value. 2

6 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 7-3 $330,312.85$46,505.617.1 times  = Net Sales on Account Average Book Value of Accounts Receivable Accounts Receivable Turnover Ratio  = CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIO page 211 Compute the accounts receivable turnover. 3

7 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 7-3 3657.151  = Days in Year Accounts Receivable Turnover Ratio Average Number of Days for Payment  = CALCULATING THE ACCOUNTS RECEIVABLE TURNOVER RATIO page 211 Compute the average number of days for payment. 4

8 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 7-3 ANALYZING ACCOUNTS RECEIVABLE TURNOVER RATIOS page 212

9 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 7-3 DEFINE TERMS REVIEW In Quizlet accounts receivable turnover ratio book value of accounts receivable page 213 Edit this set: Chapter 7 AdvAcc (then SAVE)

10 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Exit Ticket for today: Audit Your Understanding 7-3 1.What is the formula for calculating the accounts receivable turnover ratio? 2.How would you interpret the situation of a business that desires an accounts receivable turnover ratio of 12.0 times but actually has a turnover ratio of 6.0 times. 3.How can extremely restrictive credit terms have a negative impact on a business? 10 LESSON 7-3 In a Word Document, SaveAS: Chapter7-3AYUYourName And drop in my Inbox today!

11 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Complete the following assignments for Chapter 7-3 today Define Terms Review on page 213. Answer Audit Your Understanding questions on page 213. Complete Work Together 7-3 on Aplia – page 213. Complete On Your Own 7-3 on Aplia – page 213. Complete Application Problem 7-5 on Aplia – page 216. Complete Application Problem 7-6 on Aplia – page 217. 11 LESSON 7-3

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