CH8 Accounts Receivable

CH8 Accounts Receivable - CH 8Accounts Receivable Some...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CH 8—Accounts Receivable Some customers would be unable or unwilling to pay their accounts = some account receivables will become uncollectable. Companies record credit losses as debits to uncollectible accounts expense = Bad Debts Expense (adjusting/contra-account to sales revenue). Two methods used for uncollectible accounts: 1. Direct write-off method = when a company determines uncollectible account, charges the loss to Bad Debts Expense = NOT ACCEPTABLE Dr Accounts Receivable 1,000 Cr Sales 1,000 Dr Bad Debt Expense 100 ( uncollectible) Cr Accounts Receivable 100 ( uncollectible) Net Income during period of sales inflated Balance sheet also inflated When subsequently write-off, it affects subsequent period’s balance sheet and income statement 2. Allowance method = involves estimating uncollectible accounts Estimate uncollectible accounts receivable; match estimated expense against revenues Debit estimated uncollectible to Bad Debts Expense and credit to Allowance for
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

CH8 Accounts Receivable - CH 8Accounts Receivable Some...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online