COMMERCE 1AA3 Lecture Notes - Lecture 17: Bank Reconciliation, Accounts Receivable
23 Oct 2016
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Adjusting entries an entry is required for items recorded by the bank but not the company. Accounting for bad debts result from credit customers who will not pay the business the amounts they owe, regardless of collection efforts direct write-off method. Acceptable for small businesses with small accounts receivables. Companies recognize bad debt expense in the period in which the sale is made. Allowance ( a contra asset account, has a credit balance) When writing off accounts receivable, it does not affect assets or income. The effect on the income statement and balance sheet happened at the same time during the adjusting entry. We have already accounted bad debts in the period in which credit sales were made. The matching principle (expenses have to be recognized in the same period as which the revenue is earned) Bad debt expense is the expense of credit sales.
