Allowance Method of Recording Uncollectible Accounts Expense

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Presentation transcript:

Allowance Method of Recording Uncollectible Accounts Expense LESSON 7-2 5/14/2018 LESSON 7-2 Allowance Method of Recording Uncollectible Accounts Expense Allowance method of recording uncollectible accounts expense Estimating uncollectible accounts expense using a percentage of net sales Estimating uncollectible accounts expense using a percentage of accounts receivable Estimating the balance of uncollectible accounts by aging accounts receivable Writing off an uncollectible account Collecting a written-off account RED

Competency: Accounting Adjustments and Valuation/Accounting for Uncollectible Accounts Objectives 51. Record uncollectible accounts receivable LESSON 7-2

ADJUSTMENT USING THE PERCENTAGE OF SALES METHOD page 205 Estimated Uncollectible Accounts Expense = Percentage × Net Sales 1 $566.43 = 0.5% × $113,285.75 2 1. Compute the estimated uncollectible accounts expense. 2. Record an adjustment on a worksheet. LESSON 7-2

ADJUSTMENT USING AGING OF ACCOUNTS RECEIVABLE page 206 LESSON 7-2

ADJUSTMENT USING PERCENTAGE OF ACCOUNTS RECEIVABLE page 207 1 2 3 1. Compute an estimate for each age group. 2. Compute the total estimate. 3. Compute the addition to the allowance account. LESSON 7-2

WRITING OFF AN UNCOLLECTIBLE ACCOUNT—ALLOWANCE METHOD page 208 January 5. Wrote off Candace Rhode’s past due account as uncollectible, $42.80. Memorandum No. 71. LESSON 7-2

COLLECTING A WRITTEN-OFF ACCOUNT— ALLOWANCE METHOD page 209 April 5. Received cash in full payment of Candace Rhode’s account, previously written off as uncollectible, $42.80. Memorandum No. 92 and Receipt No. 280. 1 2 1. Reopen the account. 2. Record the cash receipt. LESSON 7-2

TERMS REVIEW page 210 allowance method of recording losses from uncollectible accounts aging accounts receivable LESSON 7-2