Receivables Basics
This represents money owed by customers from credit sales.
What are Accounts Receivable?
Under this method, bad debt is recorded only when deemed uncollectible.
What is the Direct Write-Off Method?
This method estimates uncollectible accounts in advance.
What is the Allowance Method?
Writing off under allowance method affects these two accounts.
What are Allowance and Accounts Receivable?
NRV equals Accounts Receivable minus this account.
What is Allowance for Doubtful Accounts?
This is the net amount expected to be collected from receivables.
What is Net Realizable Value?
Journal entry when writing off a $1,000 receivable.
Dr Bad Debt Expense 1,000; Cr Accounts Receivable 1,000
If estimated at 5% of credit sales, this account is debited.
What is Bad Debt Expense?
Recording bad debt estimate increases this expense account.
What is Bad Debt Expense?
If bad debt expense increases, net income will do this.
What is decrease?
This account reduces Accounts Receivable under the allowance method.
What is Allowance for Doubtful Accounts?
This accounting principle is violated by the direct write-off method.
What is the Matching Principle?
If allowance has a debit balance before adjustment, it means this.
What is previous estimates were too low?
Recovery under allowance method requires these two steps.
What is reinstate receivable and record cash collection?
Percentage of sales method focuses on this statement.
What is the Income Statement?
This principle requires expenses to be matched with revenues.
What is the Matching Principle?
If a customer later pays, this account is credited under direct write-off.
What is Bad Debt Recovery (or Revenue)?
Journal entry to write off a $2,000 account under allowance method.
Dr Allowance 2,000; Cr Accounts Receivable 2,000
Adjusting entry if required ending allowance is $10,000 credit and current balance is $3,000 credit.
What is Dr Bad Debt Expense 7,000; Cr Allowance 7,000?
Overestimating bad debts will cause assets to be this.
What is understated?
Receivables turnover measures this performance indicator.
What is how efficiently receivables are collected?
This financial statement may overstate assets before write-off.
What is the Balance Sheet?
This method better follows GAAP/IFRS standards.
What is the Allowance Method?
Under percentage of receivables method, focus is on this statement.
What is the Balance Sheet?
This ratio = Net Credit Sales / Average Accounts Receivable.
What is Receivables Turnover Ratio?