Valuing accounts receivable valuing accounts

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Unformatted text preview: ts Receivable Sales on account raise the possibility of accounts not being collected Chapter 8-7 SO 3 Describe the methods used to account for bad debts. Valuing Accounts Receivable Valuing Accounts Receivable Methods of Accounting for Uncollectible Accounts Direct Write-Off Theoretically undesirable: no matching. receivable not stated at net realizable value. not acceptable for financial reporting. Chapter 8-8 Allowance Method Losses are estimated: better matching. receivable stated at net realizable value. required by GAAP. SO 3 Describe the methods used to account for bad debts. Valuing Accounts Receivable Valuing Accounts Receivable Direct Write-off Method for Uncollectible Accounts Illustration: Assume, for example, that Warden Co. writes off M. E. Doran’s $200 balance as uncollectible on December 12. Warden’s entry is: Bad debt expense Accounts receivable Chapter 8-9 200 200 SO 3 Describe the methods used to account for bad debts. Valuing Accounts Receivable Valuing Accounts Receivable Allowance Method for Uncollectible Accounts 1. Companies estimate uncollectible accounts receivable. 2. To record estimated uncollectibles, companies debit Bad Debts Expense and credit Allowance for Doubtful Accounts (a contra­ asset account). 3. When companies write off specific uncollectible accounts, they debit Allowance for Doubtful Accounts and credit Accounts Receivable. Chapter 8-10 SO 3 Describe the methods used to account for bad debts. Valuing Accounts Receivable Va...
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This document was uploaded on 12/18/2013.

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