Journal Entries

Question 1

To record Bad Debts under Allowance Method

Answer 1

To record Estimated Bad Debts amount

Bad Debt Expense DR
Allowance for Doubtful account CR

To Write Off the Bad Debt when customer can’t pay

Allowance for Bad Debt DR
Customer A/R account CR

Bad Debt recovery ( Cash collect for previous write off)

A/R DR
Allowance for Doubtful Account

Question 2

Methods for Bad Debt Write off

Answer 2

1. Income statement method - this method is base on the % of sales. This is include the cash sales so this is not a very accurate method.
2. Allowance Method (Balance Sheet Method)- This method is base on a % of the balance in the aging receivable. When recording the Bad Debts, the balance in the allowance account need to take into consideration.

Question 3

What is the Journal entries for cash dividend declare and dividend pay

Answer 3

On the declaration date:

Retained Earning DR
Dividend payable CR

Dividend payment date:

Dividend payable DR
Cash CR

Question 4

What is the journal entries to record small stock dividend?

Answer 4

Retained Earning DR
Common Stock CR
Additional Pain-in Capital CR