Chapter 5 Notes Flashcards
(241 cards)
1
Q
A
2
Q
Accounts Receivable
A
Amounts owed to a company by its customers from the sale of goods or services on account.
3
Q
Credit Sales
A
Transfer goods or services to a customer today while bearing the risk of collecting payment from that customer in the future.
4
Q
Revenue Recognition
A
The seller records revenue immediately once goods or services are provided to the customer, and future collection from the customer is probable.
5
Q
Recording a Credit Sale
A
On March 1, a company provides services to a customer for $500. The customer doesn’t pay cash at the time of service, but instead promises to pay the $500 by March 31.
6
Q
Debit Entry for Credit Sale
A
Accounts Receivable ……………………. 500
7
Q
Credit Entry for Credit Sale
A
Service Revenue ……………………. 500
8
Q
Recording the Subsequent Receipt
A
On March 31, the customer pays the $500 for services provided.
9
Q
Debit Entry for Cash Receipt
A
Cash ……………………………………………. 500
10
Q
Credit Entry for Cash Receipt
A
Accounts Receivable …………….. 500
11
Q
Key Point on Accounts Receivable
A
Companies record an asset (accounts receivable) and revenue when they sell goods or services to their customers on account, expecting collection in the future.
12
Q
Nontrade Receivables
A
Receivables that originate from sources other than customers, such as tax refund claims, interest receivable, and loans by the company to other entities.
13
Q
Notes Receivable
A
Formal credit arrangements evidenced by written debt instruments (or ‘notes’).
14
Q
Concept Check 5-1
A
Which of the following generally is recorded at the time a company provides services to customers on account? a. Accounts receivable b. Interest receivable c. Notes receivable d. Tax refund claims
15
Q
Net Revenues Calculation
A
Calculate net revenues using returns, allowances, and discounts.
16
Q
Net Revenues
A
Net revenues equals total revenues less any amounts for returns, allowances, and discounts.
17
Q
Trade Discounts
A
Reduction in list price of a product or service used to provide incentives to larger customers or consumer groups to purchase from the company.
18
Q
Example of a Trade Discount
A
F.Y.Eye typically provides laser eye surgery for $3,000 but offers it for $2,400 in March, recording Accounts Receivable and Service Revenue at $2,400.
19
Q
Sales Returns and Allowances
A
Customers sometimes return goods or are dissatisfied with products or services because of a deficiency.
20
Q
Sales Return
A
Customer returns goods.
21
Q
Sales Allowances
A
Customer does NOT return goods but receives a reduction in the amount owed.
22
Q
Sales Returns Example
A
On March 2, F.Y.Eye sells sunglasses for $200 on account, and on March 4, the customer returns them, leading to a debit of $200 to Sales Returns and a credit of $200 to Accounts Receivable.
23
Q
Sales Allowances Example
A
On March 5, F.Y.Eye allows a $400 reduction for a customer dissatisfied with laser eye surgery, recording a debit of $400 to Sales Allowances and a credit of $400 to Accounts Receivable.
24
Q
Common Mistake
A
Students sometimes misclassify contra revenue accounts—sales returns and sales allowances—as expenses.
25
Contra Revenues
Contra revenues represent reductions of revenues, whereas expenses represent the separate costs of generating revenues.
26
Sales Discounts
Reduction in the amount to be received from a credit customer if collection on account occurs within a specified period.
27
Discount Terms
Discount terms, such as 2/10, n/30, indicate the amount of the discount and the time period within which it's available.
28
2/10 Discount
The term '2/10,' pronounced 'two ten,' indicates the customer will receive a 2% discount if the amount owed is paid within 10 days.
29
n/30
Means that if the customer does not take the discount, full payment net of any returns or allowances is due within 30 days.
30
2/10, n/30
Terms indicating a 2% discount is available if payment is made within 10 days; otherwise, full payment is due within 30 days.
31
Sales Discounts
Reductions in sales revenue provided to customers for early payment.
32
Net Revenues
Total revenues minus trade discounts, sales returns, sales allowances, and sales discounts.
33
Trade Discount
A reduction in the listed price of a product or service, which reduces revenue directly.
34
Sales Returns
Products that customers return to the seller, reducing sales revenue.
35
Sales Allowances
Reductions in the selling price of goods that are not returned but for which the customer receives a discount.
36
Accounts Receivable
Money owed to a company by its customers for goods or services sold on credit.
37
Income Statement
A financial statement that reports a company's revenues and expenses over a specific period.
38
Contra Revenue Accounts
Accounts that reduce total revenues, including sales returns, sales allowances, and sales discounts.
39
Adjusting Entries
Entries made at the end of an accounting period to update account balances.
40
Revenue Recognition Standard
A principle that requires a company to report revenues equal to the amount of cash it expects to be entitled to receive.
41
Cash Collection
The process of receiving cash from customers for sales made on credit.
42
Service Revenue
Income generated from providing services to customers.
43
Sales Revenue
Income generated from selling goods.
44
Ending Balance
The final amount remaining in an account at the end of a reporting period.
45
Effect of Sales Allowance
Results in a decrease to net income.
46
Collection During the Discount Period
Refers to receiving payment from customers within the specified discount period.
47
Collection After the Discount Period
Refers to receiving payment from customers after the specified discount period has expired.
48
Partial Income Statement
A segment of an income statement that shows specific revenues and expenses.
49
Laser Eye Surgery Pricing
Typically priced at $3,000, offered at a promotional price of $2,400.
50
Debit and Credit Entries
Accounting entries that increase or decrease accounts, respectively.
51
Cash Collection Amount
The specific amount of cash collected from customers, e.g., $1,960 or $2,000.
52
Sales Allowance Effect
Decreases net income.
53
Sales Allowance
A sales allowance decreases sales revenue in the income statement and decreases assets by decreasing the balance of accounts receivable.
54
Net Revenues
Net Revenues is equal to Total Revenue less Sales Returns, Sales Allowances, and Sales Discounts.
55
Allowance Method (GAAP)
Generally accepted accounting principles (GAAP) require that we account for uncollectible accounts using the allowance method.
56
Uncollectible Accounts
Customers' accounts receivable we no longer expect to collect are referred to as uncollectible accounts, or bad debts.
57
Estimation of Uncollectible Accounts
Companies must estimate the amount of current accounts receivable that will prove to be uncollectible in the future and report this estimate as a contra asset to its accounts receivable.
58
Reporting of Accounts Receivable
Under the allowance method, accounts receivable are reported for the net amount expected to be collected.
59
Contra Asset Account
Estimated future uncollectible accounts are reported in a contra asset account, reducing net accounts receivable.
60
Bad Debt Expense
The company records the estimated future bad debts as Bad Debt Expense.
61
Allowance for Uncollectible Accounts
Allowance for Uncollectible Accounts is a contra asset account that represents the amount of accounts receivable not expected to be collected.
62
Kimzey's Estimate
At the end of 2024, Kimzey is owed $20 million from customers and estimates that 30% will not be collected.
63
Calculation of Bad Debt Expense
The calculation for bad debt expense is $20 million × 30% = $6 million.
64
Write Off of Bad Debts
During the subsequent year, write off actual bad debts as uncollectible, noting that actual write-offs may differ from the previous year's estimate.
65
Reporting Allowance
We report the allowance for uncollectible accounts in the asset section of the balance sheet, but it represents a reduction in the balance of accounts receivable.
66
Initial Year Allowance
At the end of the initial year, establish an allowance by estimating future uncollectible accounts.
67
Subsequent Year Estimation
At the end of the subsequent year, once again estimate future uncollectible accounts.
68
Accounts Receivable
Accounts receivable are amounts owed to a company by its customers.
69
Net Income Effect
The effect of a sales allowance is to decrease net income.
70
Sales Returns
Sales Returns are subtracted from Total Revenue to compute Net Revenues.
71
Sales Discounts
Sales Discounts are subtracted from Total Revenue to compute Net Revenues.
72
Reporting Estimates
Under the allowance method, companies are required to estimate future uncollectible accounts and report those estimates in the current year.
73
Balance of Accounts Receivable
The balance of accounts receivable is decreased by the amount of the allowance for uncollectible accounts.
74
Contra Asset
A contra asset is an asset account that is offset by another account, such as the allowance for uncollectible accounts.
75
Net Accounts Receivable
The difference between total accounts receivable and the allowance for uncollectible accounts.
76
Allowance for Uncollectible Accounts
A contra asset that represents a reduction in a related asset, used to record estimated future uncollectible accounts.
77
Bad Debt Expense
An expense reported in the income statement that reflects the estimated uncollectible accounts.
78
Accounts Receivable
The total amount of money owed to a business by its customers for goods or services sold on credit.
79
Writing Off Accounts Receivable
The process of removing an account balance from accounts receivable when it becomes clear that the customer will not pay.
80
Contra Asset
An account that reduces the value of a related asset account on the balance sheet.
81
Balance Sheet
A financial statement that reports a company's assets, liabilities, and equity at a specific point in time.
82
Income Statement
A financial statement that shows a company's revenues and expenses over a specific period, resulting in net income or loss.
83
Collectible Accounts
Accounts receivable that are expected to be collected from customers.
84
Uncollectible Accounts
Accounts receivable that are deemed unlikely to be collected from customers.
85
Total Accounts Receivable
The total amount of accounts receivable before any deductions for uncollectible accounts.
86
Estimated Bad Debt Expense
An estimate of the amount of accounts receivable that will not be collected, recorded as an expense.
87
Normal Credit Balance
The expected balance for accounts that typically carry a credit balance, such as liabilities and contra assets.
88
Accounts Receivable Carrying Value
The net amount of accounts receivable after subtracting the allowance for uncollectible accounts.
89
Example of Writing Off
On February 23, based on information about a former patient, Kimzey believes it is unlikely the patient will pay his account of $4,000.
90
Effect of Write-Off
The write-off of the account receivable has no effect on total amounts reported in the balance sheet or in the income statement.
91
Current Assets
Assets that are expected to be converted into cash or used up within one year.
92
Credit Sales
Sales made on credit, where payment is expected to be received at a later date.
93
Revenue from Credit Sales
The total income generated from sales made on credit during a specific period.
94
Other Operating Expenses
Expenses incurred in the normal course of business operations, excluding cost of goods sold and bad debt expense.
95
Net Income
The total profit of a company after all expenses, including bad debt expense, have been deducted from revenues.
96
Bad Debt Expense
An expense recorded when an account is deemed uncollectible, typically recorded in a prior year.
97
Writing Off an Account
The process of removing an uncollectible account from accounts receivable, which reduces both accounts receivable and the allowance for uncollectible accounts.
98
Net Receivable
The amount of accounts receivable less the allowance for uncollectible accounts, which remains unchanged when an account is written off.
99
Total Assets
The overall value of everything owned by the company, which remains unchanged when an account is written off.
100
Collection on Accounts Previously Written Off
The process of receiving payment for an account that was previously written off as uncollectible.
101
Journal Entry for Collection
The accounting entries made to record the collection of cash on an account previously written off.
102
Allowance for Uncollectible Accounts
A contra asset account that estimates the portion of accounts receivable that is expected not to be collected.
103
Concept Check 5-6
A set of statements regarding the effects of writing off an uncollectible account, indicating that total assets and net income remain unchanged.
104
Adjusting the Allowance
The process of updating the allowance for uncollectible accounts in subsequent years based on expected credit sales and accounts receivable.
105
Credit Sales
Sales made on credit, which totaled $80 million for Kimzey in 2025.
106
Accounts Receivable
The total amount owed to a company by its customers, which was $30 million for Kimzey at year-end 2025.
107
Percentage-of-Receivables Method
A method of estimating uncollectible accounts based on the percentage of accounts receivable expected not to be collected.
108
Balance Sheet Method
Another name for the percentage-of-receivables method, as it bases estimates of bad debts on a balance sheet account.
109
Aging Method
A method of estimating future bad debts based on the ages of individual accounts receivable, applying higher percentages to older accounts.
110
Old Accounts
Accounts receivable that are less likely to be collected, thus assigned a higher percentage in the aging method.
111
New Accounts
Accounts receivable that are more likely to be collected, thus assigned a lower percentage in the aging method.
112
Journal Entry for Estimating Bad Debts
The accounting entry made to record the estimate of future bad debts, which is similar to that made using a single estimated percentage.
113
Aging Method
A method to estimate uncollectible accounts that is more accurate than applying a single percentage to all accounts receivable.
114
Uncollectible Accounts
Accounts that are not expected to be collected, often estimated using methods like the aging method.
115
Accounts Receivable Aging Schedule
A schedule that categorizes accounts receivable based on the number of days they are past due.
116
Estimated Percent Uncollectible
The percentage of accounts receivable that is estimated to be uncollectible based on aging.
117
Total Accounts Receivable
$30,000,000, which includes all amounts owed to the company.
118
Estimated Amount Uncollectible
The dollar amount estimated to be uncollectible, totaling $7,000,000 in this context.
119
Allowance for Uncollectible Accounts
A contra asset account that reduces the total accounts receivable to reflect amounts expected to be collected.
120
Year-end Adjustment
The adjustment made to the allowance for uncollectible accounts to ensure it reflects the estimated uncollectible amount.
121
Bad Debt Expense
An expense that reflects the estimated uncollectible accounts for the period, amounting to $5 million in the income statement.
122
Net Accounts Receivable
The total accounts receivable minus the allowance for uncollectible accounts, resulting in $23 million.
123
Current Balance of Allowance
The balance of the allowance account at the beginning of the current year less actual write-offs in the current year.
124
Write-offs
Amounts that are deemed uncollectible and are removed from accounts receivable.
125
Concept Check 5-7
A question assessing understanding of the aging method, specifically that older accounts are less likely to be collected.
126
Kimzey Medical Clinic
The entity used in the illustrations and examples regarding accounts receivable and uncollectible accounts.
127
Revenue from Credit Sales
$80 million, representing total revenue generated from sales made on credit.
128
Other Operating Expenses
$50 million, which are expenses incurred in the normal course of business operations.
129
Net Income
$25 million, the profit remaining after all expenses have been deducted from revenue.
130
Aging Method Accuracy
The aging method provides a more accurate estimate of total uncollectible accounts compared to using a single percentage.
131
Days Past Due
The categorization of accounts based on how long they have been overdue.
132
Estimated Amount Uncollectible by Age
Amounts estimated to be uncollectible based on aging: $1,600,000 for 1-60 days, $2,700,000 for 61-120 days, $2,000,000 for 120 days.
133
Balance Sheet
A financial statement that summarizes the assets, liabilities, and equity of an entity at a specific point in time.
134
Partial Balance Sheet
A section of a balance sheet that includes only specific accounts, such as accounts receivable and allowance for uncollectible accounts.
135
Aging method
Recognizes that the longer accounts are past due, the less likely they are to be collected.
136
Uncollectible accounts
Accounts that are unlikely to be collected due to age or other factors.
137
Credit balance
Indicates that the balance of the allowance account may have been too high at the beginning of the year.
138
Debit balance
Indicates that the balance of the allowance account may have been too low at the beginning of the year.
139
Subsidiary ledger
Contains a group of individual accounts associated with a particular general ledger control account.
140
Accounts receivable subsidiary ledger
Keeps track of all increases and decreases to individual customers' accounts.
141
Allowance for Uncollectible Accounts
A contra account with a credit balance that is reduced for actual bad debts.
142
GAAP
Accounting principles generally accepted in the United States of America.
143
Estimates and assumptions
Factors that affect the amounts reported in financial statements.
144
Total accounts receivable
The sum of all individual accounts in the accounts receivable subsidiary ledger.
145
Balance before adjustment
The total balance of the Allowance for Uncollectible Accounts prior to any year-end adjustments.
146
Year-end adjustment
An adjustment made to the Allowance for Uncollectible Accounts at the end of the fiscal year.
147
Write-offs
Amounts that are removed from the accounts receivable balance due to being deemed uncollectible.
148
Credit balance of $2,000
Indicates that last year's estimate of bad debts was too high.
149
0-60 days
$1,238 million total for Indemnity, Managed Care, Self-Pay, Medicare, Medicaid, and Other.
150
61-120 days
$366 million total for Indemnity, Managed Care, Self-Pay, Medicare, Medicaid, and Other.
151
120-180 days
$233 million total for Indemnity, Managed Care, Self-Pay, Medicare, Medicaid, and Other.
152
Over 181 days
$639 million total for Indemnity, Managed Care, Self-Pay, Medicare, Medicaid, and Other.
153
Total
$2,476 million total for all categories listed.
154
Estimated Bad Debts
The anticipated amount of accounts receivable that will not be collected, calculated as a percentage of total accounts receivable.
155
Allowance for Uncollectible Accounts
A contra asset account that reduces the total accounts receivable to reflect only the amounts expected to be collected.
156
Bad Debt Expense
An expense account that reflects the estimated uncollectible accounts for a given period.
157
Direct Write-Off Method
An accounting method where bad debts are written off only when they are deemed uncollectible, not estimated in advance.
158
Allowance Method
An accounting method that estimates bad debts in advance and records them as an expense in the same period as the related revenue.
159
GAAP
Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting.
160
Debit Balance
A balance that indicates an amount owed, typically in an expense or asset account.
161
Credit Adjustment
An entry that increases a liability or equity account or decreases an asset or expense account.
162
Accounts Receivable
Money owed to a company by its customers for goods or services delivered but not yet paid for.
163
Actual Write-Off
The process of removing an uncollectible account from the accounts receivable ledger.
164
Year-End Adjustment
An accounting entry made at the end of a financial period to update account balances.
165
Uncollectible Accounts
Accounts receivable that are not expected to be collected due to customer insolvency or other reasons.
166
Timing Difference
The difference in the timing of when bad debt expense is recognized between the allowance method and the direct write-off method.
167
Write-Off Entry
The journal entry made to remove an uncollectible account from the books, typically involving a debit to Bad Debt Expense and a credit to Accounts Receivable.
168
Percentage of Accounts Receivable
A method used to estimate bad debts based on a fixed percentage of total accounts receivable.
169
Credit Balance
A balance that indicates an amount that is owed to the company, typically in a liability or equity account.
170
Common Mistake in Accounting
The erroneous belief that bad debt expense should only be recorded when the bad debt actually occurs, rather than estimating it in advance.
171
Adjustment Amount
The specific dollar amount that needs to be recorded to adjust an account balance, such as the $22,000 needed to adjust the Allowance for Uncollectible Accounts.
172
Service on Account
Providing goods or services to a customer with the expectation of future payment.
173
Debit to Bad Debt Expense
An accounting entry that increases the Bad Debt Expense account, reflecting the estimated uncollectible accounts.
174
Credit to Allowance for Uncollectible Accounts
An accounting entry that increases the Allowance for Uncollectible Accounts, reflecting the estimated bad debts.
175
Debit to Accounts Receivable
An accounting entry that increases the Accounts Receivable account, reflecting the amount owed by customers.
176
Credit to Accounts Receivable
An accounting entry that decreases the Accounts Receivable account, reflecting the removal of an uncollectible account.
177
Direct write-off method
The direct write-off method waits to reduce accounts receivable and record bad debt expense until accounts receivable prove uncollectible in the future.
178
Overstatement of accounts receivable
This leads to accounts receivable being overstated in the current year.
179
Acceptability of direct write-off method
The direct write-off method generally is not acceptable for financial reporting.
180
Notes receivable
Notes receivable are assets.
181
Classification of notes receivable
We classify notes receivable as either current or noncurrent, depending on the expected collection date.
182
Long-term asset
If the time to maturity is longer than one year, the note receivable is a long-term asset.
183
Face value of note
The face value of the note is $10,000.
184
Due date of note
The due date of the note is six months after February 1, 2024.
185
Interest rate
The interest rate on the note is 12%.
186
Promissory note
A promissory note is a written promise to pay a specified amount of money at a specified time.
187
Service revenue
Service revenue is recognized when services are provided, as in the case of Kimzey providing $10,000 of services.
188
Reclassifying accounts receivable
When Justin signs the note, Kimzey records the transaction to reclassify the existing account receivable as a note receivable.
189
Interest calculation
Interest on Kimzey's note receivable is calculated as the face value multiplied by the annual interest rate multiplied by the appropriate fraction of the year.
190
Interest for six-month note
The terms of the six-month note mean that Kimzey will charge Justin Payne one-half year of interest, or 6%, on the face value.
191
Interest formula
Interest = Face value × Interest rate × Fraction of the year.
192
Interest amount
The interest amount calculated for the note is $600.
193
Fraction of the year
For a six-month note, the fraction of the year is 6/12.
194
Formal credit arrangements
Notes receivable are similar to accounts receivable except that notes receivable are formal credit arrangements made with a written debt instrument, or note.
195
Notes Receivable
A financial asset representing a written promise for a borrower to pay a specified amount of money at a future date.
196
Interest Revenue
The income earned from interest on notes receivable, calculated based on the principal amount, interest rate, and time period.
197
Accrued Interest
Interest that has been earned but not yet received in cash or recorded in the financial statements.
198
Interest Receivable
An asset account that represents interest that has been earned but not yet collected.
199
Collect Note Receivable and Interest
The process of receiving payment for the principal and interest of a note receivable at maturity.
200
Maturity Date
The date on which the principal amount of a note receivable is due to be paid.
201
Face Value
The nominal value of a note, which is the amount that the borrower agrees to pay back.
202
Interest Calculation Formula
Interest revenue = Principal × Interest Rate × Time Period.
203
Adjusting Entry
An accounting entry made at the end of an accounting period to allocate income and expenses to the correct period.
204
Collection Entry
The journal entry made to record the collection of cash for a note receivable and its interest.
205
Average Collection Period
The average number of days it takes a company to collect its accounts receivable.
206
Receivables Turnover Ratio
A financial ratio that measures how many times a company collects its average accounts receivable during a period.
207
Interest Revenue for 2024
Interest Revenue = $5,000 × 6% × 4/12 = $100.
208
Interest Revenue for 2025
Interest Revenue = $5,000 × 6% × 6/12 = $150.
209
Principal Amount
The original sum of money borrowed or invested, excluding any interest or additional fees.
210
Interest Rate
The percentage of the principal amount charged as interest over a specified period.
211
Time Period
The duration for which interest is calculated, typically expressed in years or fractions of a year.
212
Collecting Interest
The process of receiving payment for interest that has accrued on a note receivable.
213
Accrual of Interest Revenue
Recording interest revenue that has been earned but not yet received in cash.
214
Note Issued Date
The date on which a note receivable is created and the borrower receives the funds.
215
Note Due Date
The date on which the borrower must repay the principal and any accrued interest.
216
Interest Revenue from 2024
Interest Revenue = $10,000 × 12% × 2/12 = $200.
217
Interest Revenue from 2025
Interest Revenue = $10,000 × 12% × 4/12 = $400.
218
Full Amount Owed
The total sum that includes both the principal and any accrued interest that must be repaid by the borrower.
219
Receivables Turnover Ratio
$18,479 ÷ $2,669 = 6.9
220
Average Collection Period (Tenet Healthcare)
365 ÷ 6.9 = 52.9
221
Receivables Turnover Ratio (CVS Health)
$256,776 ÷ $18,624 = 13.8
222
Average Collection Period (CVS Health)
365 ÷ 13.8 = 26.4
223
Higher receivables turnover
Tenet Healthcare has a higher receivables turnover compared to CVS Health.
224
Shorter collection period
Tenet Healthcare has a shorter collection period compared to CVS Health.
225
Efficient cash collection
Tenet Healthcare more efficiently collects cash from patients.
226
Accounts Receivable Turnover of 10
The average collection period is computed as 365 divided by the accounts receivable turnover of 10 (= 36.5 days).
227
Percentage-of-Credit-Sales Method
Estimating uncollectible accounts using a percentage of credit sales.
228
Estimate of Uncollectible Accounts (Credit Sales)
10.0% of credit sales in 2025 year will not be collected.
229
Estimate of Uncollectible Accounts (Receivables)
20% of Accounts Receivable at the end of 2025 will not be collected.
230
Bad Debt Expense Adjustment (Credit Sales)
Bad Debt Expense = 8, Allowance for Uncollectible Accounts = 8
231
Bad Debt Expense Adjustment (Receivables)
Bad Debt Expense = 4, Allowance for Uncollectible Accounts = 4
232
Income Statement Effect (Percentage-of-Credit-Sales)
Revenues = $80, Bad debt expense = (8), Net income = $72
233
Income Statement Effect (Percentage-of-Receivables)
Revenues = $80, Bad debt expense = (4), Net income = $76
234
Balance Sheet Effect (Percentage-of-Credit-Sales)
Accounts receivable = $30, Less: Allowance = (6), Net accounts receivable = $24
235
Balance Sheet Effect (Percentage-of-Receivables)
Accounts receivable = $30, Less: Allowance = (10), Net accounts receivable = $20
236
Adjustment for Uncollectible Accounts
Adjust the allowance for uncollectible accounts for the current year's credit sales that we don't expect to collect.
237
Adjusting Entry for Bad Debts
The adjusting entry includes a debit to Bad Debt Expense and a credit to Allowance for Uncollectible Accounts.
238
Bad Debt Estimate Calculation
The adjustment equals $500,000 × 4% = $20,000.
239
Accounts Receivable Balance
100000
240
Allowance for Uncollectible Accounts Balance
$2,000 (credit)
241
Credit Sales Amount
500000
