Section 2: 30–40%2B
Trade Receivables
Exam insight
Trade receivables MCQs focus on bad debt estimates and allowance accounting, so expect 2-3 questions per sitting. The one to watch: under the balance sheet approach (aging of AR), you adjust for the existing allowance balance before recording bad debt expense. If the allowance already has a $5,000 debit balance and your target is a $30,000 credit, the entry is $35,000, not $30,000. Also nail the difference between factoring without recourse (AR comes off your books, so it's a sale) and assignment (AR stays on your books, so it's a borrowing).
What AICPA wants you to know
- 1Compute bad debt expense and the allowance using the income statement and balance sheet approaches
- 2Apply the CECL model (ASC 326) for estimating expected credit losses
- 3Distinguish factoring without recourse from factoring with recourse
- 4Explain assignment and pledging of receivables and proper accounting treatment
- 5Calculate net realizable value of accounts receivable
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.