Chapter 8 Notes.docx - Chapter 8 Notes(Receivables Direct...

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Chapter 8 Notes (Receivables) Direct write-off method -When a specific customer’s account is uncollectible Bad Debts Expense Accounts Receivable (To write off an uncollectible account) -Because revenues might be recorded in one period while the expense might be recorded in the next period, the direct write-off method has the potential for violating the matching principle Allowance method -Used when debts are material in amount -Uncollectible accounts receivable are estimated and matched against sales in the same period in which the sales occurred Bad Debts Expense Allowance for Doubtful Accounts (To record estimate of uncollectible accounts) - Bad debts expense is on the income statement as an operating expense -Allowance for doubtful appears on the balance sheet as a contra account to AR -It’s subtracted from AR, and the different is the cash (net) realizable value of AR Journal entry to record the write-off of an uncollectible account: ( when you know

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