Chapter 7

Chapter 7 - Chapter 7 Accounts and Notes Receivable: -...

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Chapter 7 Accounts and Notes Receivable: - Accounts Receivable: amounts due from customers for credit sales - Uncollectible accounts: when a company directly grants credit to its customers, not expecting the customer will pay when they promised (see Direct Write-Off Method) o Debit: Bad debts expense o Credit: Accounts receivable o Once the customer pays his account Debit: Accounts receivable Credit: bad debts expense Debit: Cash Credit: Accounts receivable - Maturity Date: day that the note must be repaid o Always the last day of the month - Direct Write-off Method: records a loss from an uncollectible account when it is determined to be uncollectible (see Uncollectible accounts notes above) o Debit: bad debts expense o Credit: accounts receivable - Allowance method: estimates and reports bad debts expense from credit sales during the period of the sales and reports accounts receivable at the amount of cash to be collected
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o Haven’t completely paid it off yet o We must use estimated losses because when sales occur, management does not know which customers will not pay their bills o Means that at the end of each period, the allowance method REQUIRES
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Chapter 7 - Chapter 7 Accounts and Notes Receivable: -...

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