Recievables & Allowances Flashcards
What is required for the direct write off method
Tax reporting
In direct write off, credit loss expensive recognized when
Account is deemed uncollectible
Direct write off doesn’t use
Allowance account
Direct write off reports value of receivable at
Gross amount
Direct write off basic journal entry accounts
Debit credit loss expense
Credit AR
Allowance method is required for
Financial reporting
Allowance method credit loss is recognized
At end of period
Allowance values are reported at
Net carrying value
Allowance basic JE
Debit credit loss expense
Credit allowances
Factoring is
Sale of short term AR
Discounting is
Sale of long term note
Sale without recourse means
Risk is assumed for uncollectibles
Discount on note formula
Face value
- PV of note based on mark rate
Accrued interest on note formula
Face value
* interest rate
* # of months elapsed
Ending allowance formula
Beginning balance - write offs + % uncollectible
Allowance for credit losses, debit side (WO & RC)
Written off accouunts
Reversal credit loss expense
Allowance for credit losses, credit side, (BAC)
Beginning balance
Accounts recovered
Credit loss expense
Accounts receivable debit side (BCR)
Beginning balance
Credit sales
Reinstatement of wrote off account
Accounts receivable, credit side (CWR)
Collections
Write offs
Recoveries
Recovery has no effect on
Total current assets & net income
Recovery reduces
Net realizable value
Recovery increases
Cash
Beginning allowance for doubtful accounts plus_______ - ________ = ending allowance
+Bad debt expense or accounts recovered
-Accounts written off
Bad debt expense formula
Required ending allowance - beginning allowance - AR write off + AR recovered
Lower cost or market only applies to
LIFO or retail inventory methods
