Financial & Managerial Accounting - Chapter 8

Front 1

Entry to write off an uncollectible account (Direct Write-Off)

Back 1

Bad Debt Expense...Debit
Accounts Receivable......Credit

Front 2

Entry for Reinstatement and Receipt of cash

Back 2

Accounts Receivable...Debit
Bad Debt Expense....Credit

Cash...Debit
Accounts Receivable...Credit

Front 3

Entry for Estimated Bad Debts

Back 3

Bad Debt Expense....Debit
Allowance for Doubtful Accounts...Credit
(Uncollectible accounts estimate)

Front 4

Entry for Write-offs to the Allowance Account

Back 4

Allowance for Doubtful Accounts...Debit
Accounts Receivable...Credit

Front 5

Entry for Reinstatement and Collection of Write-Offs

Back 5

Accounts Receivable...Debit
Allowance for doubtful accounts...Credit
Cash...Debit
Accounts Receivable...Credit

Front 6

Estimating Bad Debt Expense

Back 6

Bad Debt Expense =

Credit Sales x Bad Debt Expense as a Percent of Credit Sales

Front 7

Adjusting entry for uncollectible accounts (end of accounting period)

Back 7

Bad debt expense...Debit
Allowance for Doubtful Accounts...Credit
(Uncollectible accounts estimate)

Front 8

Process of Aging the Receivables

Back 8

Step 1 - The due date of each account is determined.

Step 2 - The number of days each account is past due is determined. This is the number of days between the due date fo the account and the date fo the analysis

Step 3 - Each account is placed in ann aged class account according to its days past due.

Step 4 - The totals for each aged class are determined

Step 5 - The total for each aged class is multiplied by an estimated percentage of uncollectible accounts for each aged class.

Step 6 - The estimated total of uncollectible accounts is determined as the sum of the uncollectible accounts for each aged class

Front 9

Interest on a Note (calculation)

Back 9

Interest = Face Amount x Interest Rate x (Term/360 Days)

Front 10

Maturity Value

Back 10

Face amount + Interest (amount that must be paid at the due date of the note)

Front 11

Entry fro the Receipt of a Note (from customer to replace an account receivable)

Back 11

Notes Receivable...Debit
Accounts Receivable...Credit

Front 12

Entry of Maturity Value (on due date)

Back 12

Cash...Debit
Notes Receivable...Credit
Interest Revenue...Credit

Front 13

Entry of Dishonored Note Receivable (on due date)

Back 13

Accounts Receivable...Debit
Notes Receivable...Credit
Interest Revenue...Credit

Front 14

Adjusting entry for accrued interest at the end of accounting period

Back 14

Notes Receivable...Debit
Accounts Receivable...Credit

Interest Receivable...Debit
Interest Revenue...Credit
Accrued interest (between issuance and end of period)

Cash...Debit
Notes Receivable...Credit
Interest Receivable...Credit (from end of last period)
Interest Revenue...Credit (total interest - interest receivable)

Front 15

Accounts Receivable Turnover

Back 15

Accounts Receivable Turnover = Net Sales/Average Accounts Receivable

Front 16

Number of Days' Sales in Receivables

Back 16

Number of Days' Sales in Receivables = Average Accounts Receivable / Average Daily Sales