Acct. 221 1st Edition Lecture 13Outline of Last Lecture I. Inventory Turnover RateOutline of Current Lecture 1. Uncollectible Accountsa. Write Ofb. ReinstatementCurrent Lecture Uncollectible Accounts How do you calculate it? Two methods:- % of sales (income statement method) Gross Sales = Revenue Net Sales = Revenue – sales returns, purchases, and discounts Credit or on Account sales - Aging of receivable balances What you calculate is the ending balance in the allowance account. **Be careful on % of sales:- Could be gross sales, net sales, or sales on account! What you calculate IS your adjustment! Write- off: Decrease allowance = debit entry Decrease accounts receivable = credit entry Net Realizable stays the same before and after a write off- Debiting a contra asset and crediting an asset Reinstate Account Step1:- Debit accounts receivable - Credit allowance Step 2:These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Debit cash- Credit accounts receivable If you want to record cash but not reinstate account Credit allowance Debit cash If you have debit balance in allowance,In allowance for uncollectible accounts: A credit balance reduces the needed adjustment while a debit balance increases the needed
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