At the end of each period, estimate total bad debts expected to be realized from that period's sales
  • Direct Write-off Method
  • Accounts Receivable
  • Allowance Method
  • Percent Of Sales Method
The term receivables includes all money claims against other entities, including people, companies, and other organizations. The receivables that result from sales on account are normally accounts receivable or notes receivable.Notes and accounts receivable that result from sales transactions are sometimes called trade receivables.
  • Recognizing Notes Receivable
  • Classification of Receivables
  • analysis of receivables method
  • indications of uncollectible receivables
The receivable is past due.The customer does not respond to the company's attempts to collect.The customer files for bankruptcy.The customer closes its business.The company cannot locate the customer.
  • Reporting Receivables on the Balance Sheet
  • Estimating a bad debt expense two methods
  • indications of uncollectible receivables
  • Recognizing Notes Receivable
the write off does not affect the realizable value of accounts receivable
  • Recording an Honored Note
  • Computing Maturity and Interest
  • writing off a bad debt
  • Percent of sales method
records bad debt expense only when an account is determined to be worthless. often used by small companies and companies with few receivables
  • Percent of sales method
  • allowance method
  • direct write-off method
  • Recovering a bad debt
an amount due from another party.
  • Accounts Receivable
  • 2 uncollectible receivables
  • Aging of Receivables Method
  • Uncollectible Receivables
records bad debt expense by estimating uncollectible accounts at the end of the accounting period. - Generally accepted accounting principles (GAAP) require companies with a large amount of receivables to use the allowance method.
  • accounts receivable
  • direct write-off method
  • percent of sales method
  • allowance method
All receivables that are expected to be realized in cash within a year are reported in the Current assets section of the balance sheet
  • notes receivable promissory note
  • Recognizing Notes Receivable
  • indications of uncollectible receivables
  • Reporting Receivables on the Balance Sheet
Because Allowance for Doubtful Accounts is based on an estimate, it will normally have a balance at the end of a period. The total write-offs to the allowance account during the period will rarely equal the balance of the account at the beginning of the period.- The allowance account will have a credit balance at the end of the period if the write-offs during the period are less than the beginning balance. -The allowance account will have a debit balance at the end of the period if the write-offs during the period exceed the beginning balance.
  • Classification of Receivables
  • Aging of Receivables Method
  • indications of uncollectible receivables
  • Write-Offs to the Allowance Account
Bad debt expense- Daccounts receivable- C
  • 2 uncollectible receivables
  • Percent of sales method
  • direct write-off method
  • Direct Write-Off Method for Uncollectible Accounts
A major issue of selling merchandise or services on account (on credit) is that some customers will not pay their accounts. That is, some accounts receivable will be uncollectible.Regardless of how careful a company is in granting credit, some credit sales will be uncollectible. The operating expense recorded from uncollectible receivables is called bad debt expense, uncollectible accounts expense, or doubtful accounts expense.
  • Uncollectible Receivables
  • 2 uncollectible receivables
  • Classification of Receivables
  • Aging of Receivables Method
Bad debts expense is computed current period credit sales x bad debt%= estimated bad debt expense
  • direct write-off method
  • writing off a bad debt
  • Recovering a bad debt
  • Percent of sales method
- Classify each receivable by how long it is past due- Each age group is multiplied by its estimated bad debts percentage.- Estimated bad debts for each group are totaled.- Based on assumption that the longer a receivable is outstanding, the less likely it is that it will be collected.
  • Aging of Receivables Method
  • analysis of receivables method
  • Uncollectible Receivables
  • Recognizing Notes Receivable
It records estimated bad debts expense in the period when the related sales are recorded.It reports accounts receivable on the balance sheet at the estimated amount of cash to be collected
  • Estimating a bad debt expense two methods
  • indications of uncollectible receivables
  • two advantages to the allowances method
  • Reporting Receivables on the Balance Sheet
Notes receivable are usually recorded in a single Notes Receivable account to simplify recordkeeping. The original notes are kept on file, including information on the maker, rate of interest, and due date.
  • Classification of Receivables
  • Recovering a bad debt
  • Recognizing Notes Receivable
  • indications of uncollectible receivables
a written promise to pay a specified amount of money, usually with interest, either on demand or at a definite future date
  • Computing Maturity and Interest
  • Aging of Receivables Method
  • notes receivable promissory note
  • Reporting Receivables on the Balance Sheet
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