Accounting Exam #3 - Accounting Exam#3 19:21 Chapter 8...

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Accounting Exam #3  19:21 Chapter 8  Recognizing Accounts receivable When a purchase is made on credit and payment is not made within 25-30 days then  you will debit accounts receivable and credit Interest revenue    Uncollectable Accounts  Direct write off method  Debit bad Debts expense  Credit accounts receivable  Allowance Method  Companies estimate uncollectable accounts and match them against revenues  Companies record estimated uncollectibles as a debit (increase) to bad debts expense  and credit (increase) to Allowance for doubtful accounts  Adjusting entry at the end of each period  REVIEW 230 SPRING 2011 EXAM #3 Remember to review the glossary, and study objectives for each chapter. I have noted  the homework problem that pertains to the area of knowledge. Be able to prepare journal entries to record sales and collections during the period when  discount terms are offered. E8-1 E8-2 Sales on Account  Debit: Accounts Rec. 
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Credit: Sales  How do companies manage receivables?  How and why the allowance method is used for accounting for bad debt. E8-3 If allowance for doubtful accounts has a credit balance then you subtract from the  estimated uncollectable accounts  Why? provides better matching of expenses with revenues on the income statement. It  also ensures that receivables are stated at their cash (net) realizable value on the  balance sheet Be able to journalize the adjusting entry for bad debt expense using the allowance  method; with the ending balance prior to the adjustment either a credit or debit balance.  What happens when the amount of bad accounts existing the accounts receivable  balance are overstated or understated? Journalizing Bad Debt expense  Bad Debt expense: Debit  Allowance for doubtful accounts: credit  Overstated/Understated?  Accounts Receivable: Debit  Allowance for doubtful accounts: Credit  (to reinstate accounts rec.) Cash Accounts receivable  (to record collection)  Based on the terms and when revenue is recognized be able to record the transaction of  a sales (with or without terms), sales returns and collections on accounts; Be able to  calculate the net accounts receivable on the balance sheet based on the transactions. How an uncollectible account is written off using the allowance method. 
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This note was uploaded on 01/30/2012 for the course ACCTG 230 taught by Professor Pearson during the Spring '07 term at Washington State University .

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Accounting Exam #3 - Accounting Exam#3 19:21 Chapter 8...

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