COMMERCE 1AA3 Chapter Notes - Chapter 5: Accounts Receivable, Income Statement
11 Dec 2016
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Monetary claims by others acquired mainly by: accounts receivables selling of goods and services, notes receivables lending of money. A down side is some people cannot pay uncollectible-account expense. Cost to seller of extending credit and arises from failure to collect money. Accounting for bad debts: direct write-off method, allowance method. Recognizes bad debts expense when accounts receivable determined to be uncollected: bad debt expense xxx. Recognizes bad debt expense when accounts receivable estimated to be uncollected. Amount of accounts receivable not collected is called: allowance for uncollectible accounts/doubtful accounts/bad debts. Reports accounts receivable at not realizable value: accounts receivable allowance for uncollectible accounts. Reporting on balance sheet: accounts receivable xxx. End of year adjusting entry: bad debt expense xxx. Writing of accounts receivable: allowance for uncollectible accounts xxx. Accounts receivable can be collected: accounts receivable xxx. Direct assumes accounts receivable will be collected, therefore, accounts receivable reported at gross value.
