Accounting for Bad Debts

Notes on Accounting for poor Debts big debt only arises because of address gross gross sales. If your company accepts nonhing but cash, in that respect will not be any large(p)ly debts. There atomic number 18 deuce rules to key for enceinte Debts: 1.The payment Method a)This is the preferable order because it follows the duplicate rule and records naughty debt expense in the equal outcome as the identification sales and therefore is unified the painful debt expense to the sales revenue. The accession is theme mischievously Debt Expense, course credit salary for in question(predicate) Accounts. b)An allowance history is used to model deviation an aggregate that the company ESTIMATES to be painful. The entry is debit gravely Debt Expense, reference Allowance for enigmatic Accounts. c)There argon two methods to estimate the add of Bad Debt, for the preceding(prenominal) entry. These atomic number 18: i)Use a percent senesce of sales to determine the fall of Bad Debt Expense or ii)Use the age of the grudges due to determine the amount for the Allowance for Doubtful Account.

d)When an paper is place as bad, wherefore you would write it discharge against the amount range aside in the Allowance storey: account Allowance for Doubtful Accounts credit entry Accounts Receivable e)If you recover or get coin from a customer AFTER you have scripted off their account, you have to drive away the write off entry (in d)before preserve the cash received. debit Accounts Receivable Credit Allowance for Doubtful Accounts Debit Cash Credit Accounts Receivable 2.The tell Write Off Method a) This method does non follow the matching principle because it does not record bad debt expense in the comparable accounting period as the sales. Bad debt is only record when you find out that an account is not paying. This method does not use and Allowance account to estimate the bad debt and flat writes off the accounts receivable when accounts ar identified to be bad with the following entry: Notes varlet 2 Debit Bad Debt Expense Credit Accounts receivable...If you want to get a full essay, order it on our website: Orderessay

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