Allowance Method Journal Journal Entry
Bad debt expense is recorded for the Debit: Baddebt Expense Credit:
amount of estimated uncollectibles Allowance for doubtful Accounts 500
The estimated uncollectibles are
tracked in a contra-asset called
allowance for doubtful accounts
When an estimated uncollectible
becomes a known uncollectible, it is
"writtenoff" from both the receivable Debit: Allowance for doubtful accounts
and allowance account Credit: Accounts Receivables 200
If a written-off account is eventually
paid, it must first be "recovered" by Debit: Accounts Receivable Credit:
reversing written off Allowance for doubtful accounts
Debit: Cash
Credit: Accounts receivables
Example: Aviator Corp. has A/R due from customer for $10,000. It expe
Accounts Receivable
$10,000
Balance 9800
Direct writeoff
Income Statement
Baddebt Expense
Balancesheet
Accounts receivable
Estimating BadDebts
Percent of Credit Sales Income Statement Approach
Percentage Receivables Balance sheet Approach
Percent of Credit Sales Aviators Corp. had net sales of $100,000 during the year. $70,000 of sales were on cre
baddebt j
70,000 credit sales
Baddebt Expense 10% of 70,000 = 7000
Baddebt Expense 7000
To Allowance for Doubt ful allowance
Percent of Receivables
Aviators Corp. had net sales of $100,000 during the year. $70,000 of sales were on cre
baddebt jour
Accounts Receivables
45000
70000
Total 115000
10%* 115000= 11500 (Allowance needed)
Baddebt Expense 5000
To Allowance for Doubt ful allowance
Cash A/c 3674
A/R 920
To Allowance for doubtful debt
m customer for $10,000. It expects $1,000 of the balance may be uncollectible, however at the end of the accounting period only $200 is k
unts Receivable Baddebt Expense Allowance for D/A
200 1,000 200 1,000
1000 800
Allowance Method
Income Statement
$200 Baddebt Expense $1,000
Balancesheet
$9,800 Accounts receivable net of $800 Allowance $9,000
ebts
r. $70,000 of sales were on credit, Aviator Corp's beginning A/R balance was $45,000 and its beginning allowance balance was $6,500. Rec
baddebt journal entry if they use 10% of sales as their basis.
7000
r. $70,000 of sales were on credit, Aviator Corp's beginning A/R balance was $45,000 and its beginning allowance balance was $6,500. Rec
baddebt journal entry if they use 10% of receivables as their basis.
Allowance
6500 (Beginning Balance)
5000 (Extyra needed allownace)
11500 (needed)
5000
4594
ng period only $200 is known to be uncollectible
balance was $6,500. Record Aviator Corp's
balance was $6,500. Record Aviator Corp's
STERN CORPORATION
Q1. Accounts Receivables A/c 9965575
To Sales 9965575
Cash A/c 9685420
To Accounts Receivables 9685420
Allowance for doubtful A/c 26,854
To Accounts Receivables 26,854
Cash A/c 3674
A/c receivable 920
To Allowance for uncollectible 4594
Q2. The accounts receivable remaining on
Accounts receivable december 31 2009 988257
Add increase to Accounts receivable sales on accounts during 2010 9965575
decrease to Accounts receivable for accounts for which payment was
Minus received during 2010 9685420
Minus Accounts written off in 2010 26,854
That portion still due on previously written off account which was part in
2010 with reasonable assurance of future payment of the payment of
Add the remainder 920
Accounts receivable at the end of the period 1,242,478
The provision for bad debts is 0.3 percent hence 0.3% of 1242478 37,274
Calculation for Bad debt expense 2010
The Allowance for doubtful accounts, December 31, 2009 29,648
Minus Accounts receivable written off in 2010 26,854
Increase to allowance for doubtful accounts for previously written off
accounts which are collected during the year or deemed collectible in
Add the future 4,594
Balance in account 7,388
Add additional bad debt expense needed 29,886
Total allowance for doubtful accounts, Dec 31,2010 37,274
Baddebt Expense 29,886
To allowance for doubtful debt 29886
ccounts receivable remaining on the books at the end of 2010 is calculated as follows
d debt expense 2010