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ORIE 350 lecture 6

ORIE 350 lecture 6 - Accounts Receivable It is a current...

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llowance for uncollectible amounts(XA) 0,000 3,000 050 Accounts receivable (A) 142, 000 20,000 1,400,000 1,222,000(collections) 300,000(end balance) Accounts receivable (A) owance for uncollectible amounts(XA) 500 0 00 300 Accounts Receivable It is a current asset on the balance sheet. Do not want to overstate its val on the bal.sheet We do not want to put an inaccurate value on the balance sheet Must include allowance for uncollectible accounts i. Direct write off method a. Not allowed by Generally accepted accounting principles(GAAP) b. Simply wait until an account becomes uncollectible c. Problem violates matching principle Year 2007 Year 2008 Record revenue from sales on account Record bad debt expense Solution: Estimate the bad debt expense in the period in which the sale is made. Percentage of net credit sales Adjustment is made at the time of sale or at the end of the accounting period We subtract the cash sales and net sales to get the net credit sales
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