FINANCIAL AND MANAGERIAL ACCOUNTING
FINANCIAL AND MANAGERIAL ACCOUNTING
9th Edition
ISBN: 9781264899180
Author: Wild
Publisher: MCG
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 7, Problem 5DQ
To determine

Bad debts: It refers to the amount that was expected to be received on credit sales but went uncollectible. It is a loss to the company.

Allowance for doubtful accounts: It refers to the amount that is use to keep aside by the company as a provision for the part of accounts receivable that may go uncollectible.

To explain: The reason of written off a bad debt against the allowance for doubtful accounts not reducing the estimated realizable value of a company’s accounts receivable.

Explanation:

  • The writing off a bad debt against the allowance for doubtful accounts does not reduce the estimated realizable value of a company’s accounts receivable.
  • The reason behind it, is that writing off bad debts against allowance for doubtful accounts would have the effect on accounts receivable and allowance for doubtful accounts both with the same amount by leaving the actual difference same between them.
  • The writing off a bad debt against allowance for doubtful accounts includes the journal entry of debiting allowance for doubtful accounts by crediting accounts receivable with the same amount for both the accounts.
  • So, the actual difference between the amount of the two remains the same and that results in neither decrease nor increase in the estimated realizable value of a company’s accounts receivable

Blurred answer
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License