Ch 7 Flashcards
Subsidiary ledger
Detail for a number of individual items that collectively
Make up a single general ledger account
Individual customer accounts
Account receivable
Receivable arising from a sale of goods or services
With a verbal promise to pay
Control account
General ledger account that is supported by a subsidiary ledger
Total balance of subsidiary ledgers
Direct write-off method, journal entry?
Recognition of bad debts expense at the point an
Account is written off as uncollectible
Journal entry:
Bad Debts Expense. Xxx
Accounts Receivable. Xxx
Allowance method
Method of estimating bad debts on basis of either net
Credit sales of period or accounts receivable at end
Of period
Accounting standards require this method
Allowance method journal entry for bad debts?
Bad debts expense. Xxx
Allowance for doubtful accounts. Xxx
Allowance for doubtful accounts AKA allowance for uncollectible accounts
Contra-asset account used to reduce accounts receivable to its net receivable value
Journal entry writing off accounts using the allowance method?
Allowance for doubtful accts. Xxx
Accounts receivable. Xxx
Using the Percentage of accounts receivable approach?
Bad debts over 5 years/accts receivable over 5 years
Multiply this percentage against the current accounts receivable for the period and subtract allowance for doubtful accounts from the previous period
Aging schedule
Form used to categorize the various individual accts receivable
According to length of time each has been outstanding
Older an A/R the less likely it is to get collected
Bad debts are estimated under the allowance method by which 2 approaches?
Percentage of net credit sales
Percentage of accounts receivable
Why is the allowance method of recognizing bad debts used?
It results in matching expense with revenue the period
The sale took place
Which of the two approaches to recognizing bad debts considers any existing balance in Allowance for Doubtful Accounts?
Percentage of accounts receivable approach
