ACCTNG 2400 1st Edition Lecture 16Outline of Last Lecture I. Chapter 6: financial reporting for merchandise salesa. Types of businessi. Serviceii. Merchandisingiii. Manufacturingb. Credit sales reductionOutline of Current Lecture II. Accounts receivable and Bad debtsa. Journal entriesCurrent LectureAccounts Receivable and Bad Debts- Problem: at September 30th, we have recorded Revenue and Accounts Receivable that we will NOT collect- Solution: Before September 30th, estimate the amount that will not be collectes and make an adjusting entry to record an estimated “Bed Debts Expense” in September. This is called The Allowance Method. It matched expenses with revenues.- “Allowance for Doubtful Accounts” is a contra-asset account; it normally has a credit balance that offsets Accounts Receivable. To estimate Bad Debts amount, look at past percentage of credit sales during the period.If a company usually does not collect about 5% of their total sales, then take 5% of the total sales and use that amount as the estimated Bed Debts amount.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
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