ACC 100 Chapter Notes - Chapter 7: Promissory Note, Subledger, General Ledger
28 Jun 2018
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ACC - Chapter 7
Subsidiary ledger - the detail for a number of individual items that collectively
make up a single general ledger account
Control account - the general ledger account that is supported by a subsidiary
ledger
A subsidiary ledger does not take the place of the control account in the general
ledger
The balances of the accounts that make up the subsidiary ledger should total to the
single balance in the related control account
Method accounts for bad debts
Direct write-off method - the recognition of bad debts expense at the point an
account is written off as uncollectible (using bad debts expense and A/R)
An expense is increased
Allowance method - method of estimating bad debts on the basis of either the net
credit sales of the period or the A/R at the end of the period (using bad debts
expense and allowance for doubtful accounts) *contra asset
The allowance account is reduced
Whether the direct write-off or allowance method, the entry to write off a specific
customers account reduces A/R
Approaches to the allowance method for bad debts:
Percentage of net credit sales approach - company being able to use the past
relationships between bad debts and net credit sales to predict bad debt amounts
Under percentage of net credit sales approach, the balance in the allowance
account is ignored, and the bad debts expense is simply a percentage of the
sales of the period
Percentage of A/R approach - estimate bad debts by relation them to the balance in
the A/R account at the end of the period rather than to the sales of the period
Under percent of account receivable approach the balance in the allowance
account must be considered
Also called the balance sheet method - this method estimates the balance of
allowance for doubtful accounts (a balance sheet number) using A/R
(another balance sheet number)
Aging schedule - form used to categorize the various individual accounts receivable
according to the length of time each has been outstanding
Credit card draft - a multiple-copy document used by a company that accepts a
credit card for a sale
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Subsidiary ledger - the detail for a number of individual items that collectively make up a single general ledger account. Control account - the general ledger account that is supported by a subsidiary ledger. A subsidiary ledger does not take the place of the control account in the general ledger. The balances of the accounts that make up the subsidiary ledger should total to the single balance in the related control account. Direct write-off method - the recognition of bad debts expense at the point an account is written off as uncollectible (using bad debts expense and a/r) Whether the direct write-off or allowance method, the entry to write off a specific customers account reduces a/r. Approaches to the allowance method for bad debts: Percentage of net credit sales approach - company being able to use the past relationships between bad debts and net credit sales to predict bad debt amounts.
