Jul 23, 2013 · When the estimate based on the sales approach to estimating uncollectibles is used: (Points : 1) any existing balance in the allowance for doubtful accounts is not taken into consideration. any existing balance in the allowance for doubtful accounts must be taken into consideration. only a credit balance in the allowance for doubtful accounts must be taken into …
Dec 03, 2015 · Question : When the estimate based on the sales approach to estimating uncollectibles is used: Student Answer: Any existing balance in the allowance for doubtful accounts is not taken into consideration Any existing balance in the allowance for doubtful accounts must be taken into consideration Only a credit balance in the allowance for doubtful …
Sep 27, 2017 · The percentage-of-sales basis of estimating uncollectibles A. produces a better estimate of cash realizable value. B. results in a better matching of expenses with revenues. C. emphasizes balance sheet relationships. D. considers the existing balance in Allowance for Doubtful Accounts.
Dec 10, 2021 · The allowance method of recognizing uncollectible accounts expense follows the matching principle of accounting i.e., it recognizes uncollectible accounts expense in the period in which the related sales are made. Under this method, the uncollectible accounts expense is recognized on the basis of estimates. There are two general approaches to estimate …
At the end of accounting period, the amount of uncollectible accounts is estimated and the following adjusting entry is made to recognize them:
In the next accounting period, when an account actually turns out to be uncollectible, it is written off from accounts by making the following journal entry:
The Fast company starts business on January 1, 2014. At December 31, 2014, the total accounts receivable of the company are $350,000; out of which, company estimates that the receivables amounting to $4,500 will turn out to be uncollectible.
In the preceding illustration, the $25,500 was simply given as part of the fact situation. But, how would such an amount actually be determined? If Ito Company’s management knew which accounts were likely to not be collectible, they would have avoided selling to those customers in the first place.
When an allowance method is used, how are individual accounts written off? The following entry would be needed to write off a specific account that is finally deemed uncollectible:
On occasion, a company may collect an account that was previously written off. For example, a customer that was once in dire financial condition may recover, and unexpectedly pay an amount that was previously written off.
Carefully consider that the allowance methods all result in the recording of estimated bad debts expense during the same time periods as the related credit sales. These approaches satisfy the desired matching of revenues and expenses.
A business must carefully monitor its accounts receivable. This chapter has devoted much attention to accounting for bad debts; but, don’t forget that it is more important to try to avoid bad debts by carefully monitoring credit policies.