ACC 321- Memo #1 Response

ACC 321- Memo #1 Response - Accounting Memorandum To Dr...

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Accounting Memorandum To: Dr. Rubin From: Nicholas Connolly Date: March 3 rd , 2011 Subject: Handling the Allowance for Doubtful Accounts Balance Introduction: Mr. Pierce’s feeling of confusion between the many alternative ways to handle his Allowance for Doubtful Accounts balance is a very common issue for those in the wholesale business because there are independent variables that can effect his books. In business today, there are various ways to pay for merchandise, which makes it very easy to make transactions, but it also makes it very easy to make mistakes and complicates matters if payments are off, late, or never come in. From a business perspective, accounts receivable is not something businesses like Mr. Pierce’s want necessarily, but without it a business cannot operate. Overall, the main goal for Mr. Pierce and all businesses alike is to just try and collect as fast as possible with making minimal mistakes. Purpose: 1) Allowances and Charge-Offs: Setting up an allowance on the basis of percentage of sales is the optimal choice in regards to allowances and charge-offs because this method matches costs with revenues with regards to the period of when the company records the sale. They can put this in the Bad Debt Expense, which is debited the amount that won’t be collected and the Allowance for Doubtful Accounts is credited that same amount. This
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This note was uploaded on 11/15/2011 for the course ACC 321 taught by Professor Staff during the Spring '08 term at Miami University.

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ACC 321- Memo #1 Response - Accounting Memorandum To Dr...

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