BA 3340 Lecture Notes - Lecture 30: Tax Deferral, Cash Register, Barcode
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[rule debit bad debt expense and credit allowance for doubtful debts]. The allowance for doubtful debt represents the dollar amount of receivables that a company believes will ultimately be uncollectible. Its (cid:271)ala(cid:374)(cid:272)e is su(cid:271)t(cid:396)a(cid:272)ted f(cid:396)o(cid:373) g(cid:396)oss (cid:396)e(cid:272)ei(cid:448)a(cid:271)les to (cid:455)ield the (cid:396)e(cid:272)ei(cid:448)a(cid:271)les(cid:859) net realisable value: methods of estimating bad debt expense will be covered later in these notes. Recording the recovery of a write-off (cid:131) occasionally, a company will collect a receivable that it had previously written off. When this payment occurs, two entries are made. The first entry simply reverses the original entry writing off the receivable. Accounts receivable, credit allowance for doubtful debts (to reverse original write-off). The second entry records the collection of cash and the reduction of the receivable. Debit cash, credit accounts receivable (to collect the receivable). Understand the methods for estimating bad debt expense. (cid:131) when estimating bad debt expense, companies may use one of two different approaches.
