Allowance method: Under the Allowance method the estimated bad debts expenses are recorded using the Allowance for doubtful account and the actual bad debts written off using this account. Allowance for doubtful accounts represents the amount of expected bad debts or uncollectable accounts. This account is made as a provision for future bad debts. Direct write off method: Under the Direct write off method the actual bad debts are directly written of using the accounts receivable account. Requirement-1: To prepare: The Journal entries and T accounts to record the given transactions using the Allowance method
Allowance method: Under the Allowance method the estimated bad debts expenses are recorded using the Allowance for doubtful account and the actual bad debts written off using this account. Allowance for doubtful accounts represents the amount of expected bad debts or uncollectable accounts. This account is made as a provision for future bad debts. Direct write off method: Under the Direct write off method the actual bad debts are directly written of using the accounts receivable account. Requirement-1: To prepare: The Journal entries and T accounts to record the given transactions using the Allowance method
Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.
Chapter 9, Problem P9.34BPGB
To determine
Concept Introduction:
Allowance method: Under the Allowance method the estimated bad debts expenses are recorded using the Allowance for doubtful account and the actual bad debts written off using this account. Allowance for doubtful accounts represents the amount of expected bad debts or uncollectable accounts. This account is made as a provision for future bad debts.
Direct write off method: Under the Direct write off method the actual bad debts are directly written of using the accounts receivable account.
Requirement-1:
To prepare: The Journal entries and T accounts to record the given transactions using the Allowance method
To determine
Requirement-2:
To prepare: The Journal entries and T accounts to record the given transactions using the Direct Write off method
To determine
Requirement-3:
The amount of bad debts expense to be reported in September Income Statement under both the methods and better method to match the revenue with expenses
To determine
Requirement-4:
The amount of Net Accounts Receivable to be reported on September 30, 2016 balance sheet under both the methods and the method that shows more realistic balance of Net Accounts Receivable
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