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ACTG 1P12 (20)

Chapter 7 Notes - Class 2.docx

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Brock University
Norman Chasse

ReceivablesMust be presented on Balance Sheet at their recoverable amountrealizable valueTrade receivables should be separately disclosed from o Related party receivableso Notes receivables Accounting for Uncollectible Receivables i Direct writeoff method a Only account for uncollectible Accounts Receivables with they are identified as they occur and record bad debt expenseat that time b Not GAAP c Only appropriate when uncollectible accounts are very small Journal Entry to writeoff accountsBad Debt Expense xx Accounts Receivables xx If subsequent collection arisesCash xx Bad Debt Expense xx ii Allowance Method a GAAP PEGAAP IFRS b Consistent with the MATCHING PRINCIPLE c Record the expense of bad debt in same period as year of credit sale d How establishing an Allowance for Doubtful Accounts account i Contra asset account ii Subtract from Accounts Receivable to arrive at net amount e Under this method weestimate bad debt expense and record it at period end as an adjusting entry f When actual uncollectible account is identified i No effect on Income Statement ii No effect on net Accounts Receivable g 2 methods to calculate Allowance for Doubtful Accounts i Sales method ii Accounts receivables aging method h Sales Method
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