Chapter 15 - Accounts receivable and uncollectible accounts. After reading this chapter, you should be able to: Record the estimated expense from uncollectible accounts receivable using the allowance method, charge off uncollectible accounts using the allowance method, record the collection of accounts previously written off using the allowance method,. | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Accounts Receivable and Uncollectible Accounts Section 1: The Allowance Method Of Accounting For Uncollectible Accounts Chapter 15 Section Objectives 1. Record the estimated expense from uncollectible accounts receivable using the allowance method. 2. Charge off uncollectible accounts using the allowance method. 3. Record the collection of accounts previously written off using the allowance method. Methods used for writing off accounts that are determined to be uncollectible include the: Allowance Method Direct Charge-Off Method Losses from uncollectible accounts are a normal cost of doing business. Bad Debts Allowance Method Estimates losses from uncollectible accounts. Matches uncollectible accounts expense to sales. Uses a valuation account (Allowance for Doubtful Accounts), a contra asset account which reduces the amount of accounts receivable shown on the balance sheet to . | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Accounts Receivable and Uncollectible Accounts Section 1: The Allowance Method Of Accounting For Uncollectible Accounts Chapter 15 Section Objectives 1. Record the estimated expense from uncollectible accounts receivable using the allowance method. 2. Charge off uncollectible accounts using the allowance method. 3. Record the collection of accounts previously written off using the allowance method. Methods used for writing off accounts that are determined to be uncollectible include the: Allowance Method Direct Charge-Off Method Losses from uncollectible accounts are a normal cost of doing business. Bad Debts Allowance Method Estimates losses from uncollectible accounts. Matches uncollectible accounts expense to sales. Uses a valuation account (Allowance for Doubtful Accounts), a contra asset account which reduces the amount of accounts receivable shown on the balance sheet to its “net realizable value.” The direct charge-off method is the method of recording uncollectible account losses as they occur. It is also the method used for tax purposes as the Allowance Method is not allowed since it would result in an estimated expense on the tax return. ANSWER: QUESTION: What is the direct charge-off method? 2012 Debit Credit Dec 31 Uncollectible Accounts Expense Allowance for Doubtful Accounts To record estimate of bad debts expected Recording the adjusting entry to record Uncollectible Accounts Expense is based on an estimate of bad debts for the period Using the Allowance Method Allowance for Doubtful Accounts Is a Contra-asset account Is reported as a subtraction from the Accounts Receivable account on the Balance Sheet Contains the estimate of accounts receivable deemed uncollectible Uncollectible Accounts Expense Is reported on the Income Statement as an expense account Allowance Method of recording bad debts uses two new accounts: Current .
