22107 Chapter Notes - Chapter 6: Debits And Credits, Abalone, Accounts Receivable
Document Summary
Receivable represents a business"s claim on the assets of another entity. The most common type of receivable is an account receivable. An account receivable is an amount owed by a customer who has purchased the company"s product or service. Because accounts receivables are expected to be collected quickly, they are classi ed and reported as current assets. An uncollectible expense in included in the calculation of pro ts but is usually combined with other expenses on the income statement. When the expense is recognised depends on the method of accounting for uncollectible accounts (direct write-off or allowance method) Bad expense is recorded when the business determines that a receivable is uncollectible and removes it from its records, which violates gaap. This method fails to match bad expenses with revenue, provides an opportunity to manipulate earnings, and does not provide the best estimate of how accounts receivable affects expected cash ow. One to record an estimate of bad debt expense, and.
