COMMERCE 1AA3 Lecture Notes - Lecture 9: Net Income, Matching Principle, Balance Sheet
21 Mar 2016
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Don"t study direct method for chapter 12. Acquired mainly by: selling goods and services (a/r, lending money (notes receivable) Uncollectable receivables: benefit of selling on credit. Customers that do not have cash available can buy on credit. Sales and profit increase: cost of selling on credit. This is called uncollectable-account expense doubtful account expense . 3 ways to account for bad debt: direct write-off method. Recognize the bad debt expense and credit the a/r. This goes against the matching principle and the ifrs. Under the direct write off method, when an account is written off, net income decreases: allowance for doubtful accounts. Percentage of sales method (income statement method)
