Estimation of doubtful accounts.pptx

Estimation of doubtful accounts.pptx - Estimation of...

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Estimation of doubtful accounts Romans 14:1 Him that is weak in the faith receive ye, [ but ] not to doubtful disputations.
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Methods of Estimating Doubtful Accounts 1. Percent of sales 2. Percent of accounts receivable 3. Aging the accounts receivable
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Percent of sales Doubtful accounts expense/ Bad debts expense = % x Sales
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Example: AR 1,000T Sales 5,050T Sales return 50T Allow. for DA 20T DA is 1% of net sales DAE 50T DA = 1% x 5M = 50T Allow for DA 50T
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Percent of AR Required allowance = % x AR,end DAE = Required allow. – existing allowance (credit) or + (debit)
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Example AR 1,000T Sales 5,050T Sales return 50T Allow. for DA (cr.) 20T 5% of AR Required allow. = 5% x 1,000T = 50T DAE = 50T- 20T = 30T
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Aging of AR Same with % of AR
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Problem 11-1
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Problem 11-2
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ACCOUNTS RECEIVABLE – GENERAL LEDGER (ASSET) Beginning Balance xxx 1. Credit sales xxx 2. Collection of credit sales xxx 3. Recovery of written-off accounts xxx 4. Collection of recovered written-off accounts xxx 5. Returns (credit memo) xxx 6. Written-off accounts xxx 7. Accounts settled by issuance of notes xxx
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