Allowance Method: Under the Allowance Method, the company makes an estimate of debts which may not be realizable. This estimate is based on some past experiences. Since, it is not ascertained as to which customer will not be able to pay the debt, a contra-asset account named Allowance for Bad or Doubtful Debt Account is created. This allowance for bad or doubtful debt account will be shown as a deduction to the Accounts Receivable Account on the asset side of Balance Sheet. To Determine: Effect on net realizable value shown on the Balance Sheet when a receivable is written off under the Allowance Method
Allowance Method: Under the Allowance Method, the company makes an estimate of debts which may not be realizable. This estimate is based on some past experiences. Since, it is not ascertained as to which customer will not be able to pay the debt, a contra-asset account named Allowance for Bad or Doubtful Debt Account is created. This allowance for bad or doubtful debt account will be shown as a deduction to the Accounts Receivable Account on the asset side of Balance Sheet. To Determine: Effect on net realizable value shown on the Balance Sheet when a receivable is written off under the Allowance Method
Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.
Chapter 9, Problem 15RQ
To determine
Allowance Method:
Under the Allowance Method, the company makes an estimate of debts which may not be realizable. This estimate is based on some past experiences. Since, it is not ascertained as to which customer will not be able to pay the debt, a contra-asset account named Allowance for Bad or Doubtful Debt Account is created. This allowance for bad or doubtful debt account will be shown as a deduction to the Accounts Receivable Account on the asset side of Balance Sheet.
To Determine:
Effect on net realizable value shown on the Balance Sheet when a receivable is written off under the Allowance Method
Horngren's Accounting Plus MyAccountingLab with Pearson eText -- Access Card Package (11th Edition) (Miller-Nobles et al., The Horngren Accounting Series)