MGMT 1A Lecture Notes - Lecture 12: Accounts Receivable, General Ledger, Subledger
Document Summary
Methods of handling bad debts or uncollectible accounts. Collectibility is a major business problem associated with a/r. There are 3 methods: direct write off method (tax, not gaap, allowance method (gaap, not tax) Income statement approach (% of credit sales) a: balance sheet approach (% of a/r) i. Net realizable value: value of the asset less the reasonable costs associated. Allowance account can also be called, allowance for doubtful accounts or of bad debt. This is a contra-asset account to the accounts receivable account. *the 30,000 gets added onto the allowance account because allowance account is a permanent account. * during the year, we would usually identify those who are not going to pay, and would write off their debt by . We are not doing it in this case for simplicity reasons. Cr. a/r - jonathan 500 (a/r is to the a/r ledger in general ledger, in the a/r subledger for details)
