ACCY 206 Chapter Notes - Chapter 8: Accounts Receivable, Credit Risk, Operating Expense
Document Summary
When you use this card, the retailer charges interest on the balance due if not paid within a specified period (usually. Allowance for doubtful accounts is a contra account to a/r: companies debit actual uncollectibles to allowance for. It reverses the entry made in writing off the account. As a result, the estimated percentage of uncollectible debts increases as the number of days past due increases: total estimated uncollectible accounts represent the existing customer claims expected to become uncollectible in the future. Thus, this amount represents the required balance in allowance for doubtful. This occurs because the debits to the allowance account from write-offs during the year exceeded the beginning balance in the account which was based on previous estimates for bad debts. In exchange for these advantages, the retailer pays the credit card issuer a fee of 2% to. 4% of the invoice price for its services: the retailer considers sales resulting from the use of visa and.
