Accounts receivable Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business. Bad debt expense: Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense. Percentage-of-receivables basis: It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period. Allowance method: It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt in compliance with matching principle, by using the allowance for doubtful account. To Prepare: The adjusting journal entry to adjust the allowance for doubtful accounts.

Question

Want to see the full answer?

Answer 1

Question

Chapter 8, Problem 8.2aDIE

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Percentage-of-receivables basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of receivables for a specific period.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt in compliance with matching principle, by using the allowance for doubtful account.

To Prepare: The adjusting journal entry to adjust the allowance for doubtful accounts.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Pharoah Company has been in business several years. At the end of the current year, the unadjusted trial balance shows: Accounts Receivable Sales Revenue Allowance for Doubtful Accounts $327,100 Dr. 2,066,100 Cr. 5,892 Cr. Bad debts are estimated to be 7% of receivables. Prepare the entry to adjust Allowance for Doubtful Accounts. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit

LKD’s Company ledger at the end of the current year shows Accounts Receivable of $150,000. Instructions a. If Allowance for Doubtful Accounts has a credit balance of $3,000 in the trial balance and bad debts are expected to be 10% of accounts receivable, journalize the adjusting entry for the end of the period. b. If Allowance for Doubtful Accounts has a debit balance of $3,000 in the trial balance and bad debts are expected to be 10% of accounts receivable, journalize the adjusting entry for the end of the period.

Wildhorse Co. has been in business several years. At the end of the current year, the unadjusted trial balance shows: Accounts Receivable $317,300 Dr. Sales Revenue 2,356,000 Cr. Allowance for Doubtful Accounts 5,346 Cr. Bad debts are estimated to be 7% of receivables. Prepare the entry to adjust Allowance for Doubtful Accounts. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit