Lecture_Notes_-_Assign_5_1

What happens if two are the same computer programmer

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What happens if two are the same : Computer programmer – operations and custody of assets Send the cash to a different account Accountant – accounting and custody of assets - send checks to themselves Purchases - operations and custody of assets - purchase things for themselves. Chapter 8 – Receivables Accounts Receivable Journal Entries: 1. Fees earned on account. Dr Accounts Receivable Cr Fees Earned 2. Received cash on account. Dr Cash Cr Accounts Receivable What happens if the customer does not pay? The accounts receivable is written off as an expense. Two methods to write-off an account, direct method and the allowance method. Write-off using the direct method : Dr Uncollectible Accounts Expense Cr Accounts Receivable
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Allowance Method: The allowance method uses an adjusting entry to estimate the amount of uncollectible accounts. At the end of the accounting period a review is done of either the accounts receivable or sales to estimate the amount that will not be collected. The adjusting entry for both methods is: Dr Uncollectible Accounts Expense Cr Allowance for Doubtful Accounts 1. Sales method – The expense is estimated to be a percentage of sales sales * % = uncollectible accounts expense Remember that expense accounts start the account period with a zero balance. The only time an amount is record in uncollectible accounts expense is at the end of the year for the adjusting entry. Prior to the adjusting entry the account has a zero balance, so the amount of the expense is the amount that is recorded in the account.
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