Читать книгу Financial Accounting For Dummies - Maire Loughran - Страница 24

Many companies sell goods or services to customers on account, which means the customer promises to pay in the future. When this happens, the amount of unpaid customer invoices goes into an account called accounts receivable. (See Chapters 7 and 10 for detailed info about accounts receivable.) For a business carrying a sizable amount of accounts receivable, an error in this account can have a material effect on the reliability of the income statement and balance sheet.

Independent confirmation of the accounts receivable balance is done by sending requests for confirmation. Confirmations are form letters sent to customers listed in the accounts receivable subsidiary ledger (a listing showing all customers with a balance owed). The letters seek to verify the facts and figures contained in the company’s books. The confirmation form letter is usually brief, listing the total amount the company shows the customer owes at a certain date.

Some confirmation letters ask for a response; others ask the customer to respond only if the information on the confirmation form is incorrect. An independent party, such as the company’s external certified public accountant (CPA), tallies the results of the confirmations and either verifies or refutes the amount the company asserts that its customers owe.

Consider a personal example: Think about the last time you purchased a laptop. To the novice computer buyer, the shiny black cases and colored displays all look pretty much the same. But the price of each model varies — sometimes substantially. Therefore, you have to ferret out the facts about each model to be able to compare models and decide on the best one for your needs. What do you do? You check out the manufacturer’s specs for each laptop in your price range, comparing such important facts as the size of the hard drive, processing speed, and (if you want to be truly mobile) the laptop’s size and weight. By doing so, you are able to look beyond outward appearance and make a purchasing decision based on comparative worth among your options.

Though the United States is developing a global marketplace, as of this writing, U.S. GAAP may differ significantly from accounting principles used by businesses in other countries. Therefore, comparing financial statements of a foreign-based company and a U.S.-based company is difficult.