41 - • Uncollectible Accounts Expense used for write offs...

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Balance Sheet Current assets: Accounts receivable $$,$$$ Less: Allowance for Uncollectible Accounts ( $,$$$) Accounts receivable, net $$,$$$ Methods to Estimate Uncollectibles Percent-of-sales Expense is estimated based on credit sales Income Statement approach Aging-of-receivables Accounts receivable analyzed based on how long outstanding Balance Sheet approach E5-23 Aging Schedule $37,150 Balance in Allowance $7,400 Adjustment needed E5-23 Allowance for Uncollectible Accounts Writing Off a Specific Account The allowance is used to absorb specific accounts that are determined to uncollectible When it’s determined a customer cannot pay, the following entry is made: JOURNAL Date Accounts Debit Credit Allowance for uncollectible accounts $$$$ Accounts receivable $$$$
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Direct Write-Off Method Less preferable than allowance method Does not match expenses with revenues Accounts Receivable overstated
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Unformatted text preview: • Uncollectible Accounts Expense used for write offs • No Allowance for Uncollectible Accounts Accounts Receivable Sales on account Payments on account Uncollectible accounts written off Notes Receivable Terms • Creditor • Debtor • Interest • Maturity Date • Maturity Value • Principal • Term Credit and Bank Card Sales • Credit Cards American Express and Discover • Bank Cards VISA and MasterCard • Both charge the retailer a fee Use two new ratios to evaluate a business Days’ Sales in Receivables • How long it takes a company to collect its average amount of receivable • Compute one day’s sales • Days’ sales in receivables Acid-Test Ratio • Also called quick ratio • A more stringent measure of a company’s ability to pay its current liabilities...
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This note was uploaded on 06/15/2011 for the course ACCT 23020 taught by Professor Dorff,p during the Spring '08 term at Kent State.

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41 - • Uncollectible Accounts Expense used for write offs...

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