1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 17-1 Uncollectible Accounts

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Uncollectable Accounts Businesses sell on accounts to encourage sales. Customers don’t always have $ on hand Credit worthy customers- they still may not pay on time Accounts receivable that cannot be collected are known as uncollectible accounts. Recorded as an expense 2 LESSON 17-1

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Estimating and Recording Uncollectible Accounts Expense The Allowance Method of recording losses from uncollectible accounts attempts to match the expense of uncollectible accounts in the same fiscal year the related sales are recorded. 3 LESSON 17-1

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 17-1 ESTIMATING AND RECORDING UNCOLLECTIBLE ACCOUNTS EXPENSE page 515 Estimated Uncollectible Accounts Expense =Percentage× Total Sales on Account $12,873.30=1.0%×$1,287,330.00

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning ANALYZING AND JOURNALIZING AN ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS EXPENSE At the end of a fiscal period, adjustments are made on a worksheet When the allowance account has a previous credit balance, the amount of the adjustment is added to the previous balance. 5 LESSON 17-1

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 17-1 ANALYZING AND JOURNALIZING AN ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS EXPENSE 1 2 page 516 33 1.Enter and label credit amount. 2.Enter and label debit amount. 3.Record adjusting entry.

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning POSTING AN ADJUSTING ENTRY FOR UNCOLLECTIBLE ACCOUNTS EXPENSE Adjusting entry affect 2 or the 3 accounts related to accounts receivable Allowance for uncollectible Accounts- the balance of this contra account is an estimate of outstanding accounts receivable. Uncollectible Accounts Expense- is the estimated uncollectible accounts resulting from sales on account during the fiscal year. 7 LESSON 17-1

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 17-1 POSTING AN ADJUSTING ENTRY FOR UNCOLLECTIBLE ACCOUNTS EXPENSE page 517 1 2 1.Debit 2.Credit