Prepare the entries to record write off using allowance for doubtful account and direct write off approaches. Draft Entry to record the accounts receivable that were subsequently collected. Allowance for doubtful account is treated as an expense or as a liability in general journal. Give reasons for your answer. Moreover explain the treatment of these in balance sheet. What is the characteristic common to all current assets? Many retail stores regularly sell merchandise on installment plans, calling for payments over a period of 24 or 36 months. Do such receivables qualify as current assets? Explain.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question no. 02 (b) (07)
Wilson Corporation uses an income statement approach to estimate credit losses. Its Accounts
Receivable of $5,000,000 at the beginning of the period had a net realizable value of $4,225,000.
During year 2019 company wrote off all of its uncollectible accounts. Of these accounts 35% were
subsequently collected.
Prepare the entries to record write off using allowance for doubtful account and direct write
off approaches.
Draft Entry to record the accounts receivable that were subsequently collected.
Allowance for doubtful account is treated as an expense or as a liability in general journal.
Give reasons for your answer. Moreover explain the treatment of these in balance sheet.
What is the characteristic common to all current assets? Many retail stores regularly sell
merchandise on installment plans, calling for payments over a period of 24 or 36 months. Do
such receivables qualify as current assets? Explain.
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