Chapter 6, End of Chapter, Questions, Exercise 8

Page 316

Here is a tip:

Bad debt is the amount which is not received against the accounts receivable for the goods sold or the services rendered.

Explanation

As per the allowance method, the period in which the seller identifies the account receivable that can remain unpaid is not considered to be recognized as a bad debt expense, whereas the period in which the sales to the uncollectible accounts are made is considered for recognizing the bad debt expenses.

 

The estimated bad debt loss recognition entry is passed by deducting the bad debt expense and adding the allowance for doubtful accounts at the end of the accounting period at which the sales to the uncollectible accounts are made.

Verified Answer

According to the allowance method, the period in which it is identified by the seller that the particular amount can remain unpaid is not considered to be recognized as a bad debt expense.

How would you rate this answer and explanation?
Did you like this example?
Subscribe for full access
Page 316