Week 8 - Acct Receivables & bad debt

Question 1

Methods of bad debts

Answer 1

allowance method
direct write off method

Question 2

Allowance method – for bad debts

Answer 2

.creating an Allowance for Doubtful Debts
.estimating doubtful debts
.percentage of net credit sales method
.aging of accounts method
.writing off a bad debt

Question 3

Does the allowance method impact the net accounts receivable amount?

Answer 3

No - shows that no expenses results from the write off a bad debt

Question 4

Direct write off method

Answer 4

Makes no allowance for doubtful debts and debts are written off as they are considered to be uncollectable

Question 5

Estimating doubtful debts by % of net credit methods - journal

Answer 5

Bad debts expense DR
Allowance for doubtful debts CR

.end of reporting period before next one

.GST not included - only considered when debt is actually written off

Question 6

Writing off bad debt - journal

Answer 6

Allowance for doubtful debt DR
GST Collected DR
Accounts receivable control - subsidiary CR

Question 7

Recovery of an account written off

Answer 7

Accounts receivable control - subsidiary DR
GST Collected CR
Bad debts recovered CR

THEN, for actual cash transaction

Cash at bank DR
Accounts Receivable control CR

Question 8

Direct Write off Method

Answer 8

Bad debts expense DR
GST Collected DR
Accounts receivable control - subsidiary CR