Day 4 - Chapter 9 Flashcards
What is a credit sale?
customer pays later
What is the double entry for a credit sale?
DR trade rec
CR sales
What do we do if the customer does not pay?
its a irrecoverable debt
What do we call it when we are uncertain that a customer will pay?
doubtful debt
and create an allowance for receivables
this allowance could be specific or a general allowance based off past experience
How do we account for IDE?
remove them from the receivables account
DR IDE
CR receivables
Where does IDE go?
its an expense so p/l
How do we account for IDE that we get paid?
DR cash
CR IDE
Does recovered IDE affect recievables?
no
How do you record a doubtful receivable?
DR IDE
CR allowance for receivables = CA
What is the accounting entries to create an allowance for receivables?
DR IDE
CR Allowance for Rec
How do you account for increase in allowance for rec?
DR IDE
CR Allowance for Rec
How do you account for decrease in allowance for rec?
DR Allowance for Rec
CR IDE
What is the equation for movement in allowance?
movement in allowance = closing allowance - opening allowance
What is the equation for net rec?
total rec - closing y/e allowance for rec
approach to IDE questions
insert b/f balance for rec (debit) and allowance (credit)
write off IDE
record recovery of IDE
close of rec account to obtain closing balance
calculate and post the required movement to the allowance for receiavles
close allowance and expense accounts
IDE Equation
IDE = Irrecoverable debts written off +/- increase or decrease in allowance for receivables - irrecoverable debts recovered
What is the double entry for when we receive cash from our credit customer that we made an allowance for?
DR cash
CR receivable
What is the double entry for when we write off customers debt and we previously had an allowance for the debt?
DR IDE
CR Receivable
What is the double entry if we write off a debt as irrecoverable and the debt is subsequently recovered?
DR cash
CR IDE
