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Two most common methods of measuring bad debt expense and allowance for uncollectible accounts!
A) Percentage of Sales- Income Statement Method
B) Percentage of Receivable (Balance Sheet Approach)
Balance Sheet Approach- Bad Debt Expense
Estimates the balance that should be recorded in the allowance based on the collectibility of ending gross accounts receivable. Bad Debt expense is the amount necessary to adjust the allowance. An entity using the balance sheet approach generally prepares an aging schedule for accts receivable.Move
Movement of T Account of Acc Receivable and Allowance for Uncollectible.
Account Receivable
Beg Balance AccReceivable
Plus: Credit Sales during period
Less: Cash Collected
Less: Acct Rec Written Off
____________________________________Ending Account Receivable
__________________________________
Allowance for Uncollectible
Beg Balance
Plus: Bad Debt Expense
Less: Account Write off
Plus: Collection of Receivable previouslt written off
Inventory Initial Measurement
1) Price paid or consideration
2) Import duties and other unrecoverable taxes
3) Handling, insurance, freight inn and other cost to bring the inventory and materials ready for use.
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