Chapter 8, Session 4
Assignment: Chapter 8
Q: 6, 8, 10, 11, 12
6) a) A4DA: A contra-asset account that records the portion of a company's receivables, which
it expects may not be collected. It’s estimated based on historical trends, of how much a
company believes will be uncollectible. It can be estimated in a number of different ways such
as percentage of sales, or by setting up a receivables aging schedule.
Purpose: Companies predict the amount of receivables from customers that won’t be received.
This is to anticipate and safeguard the business by creating a cushion for bad debt expenses;
creating a comfortable scenario of customer payables that are not unpaid.
b) Allowance for Doubtful Accounts (A4DA) has a normal credit balance as it is a contra
HOWEVER, allowance for doubtful accounts may have a debit balance if the amount
written off is larger than previously estimated.
10) Recovering an Account Previously Written Off > Recovery: Re-instating and collecting an
account receivable that had been previously written off as worthless.
Two separate journal entries are needed: First, the business must reinstate the
customer’s account by reversing the write-off process. Next, the colle