CannotPassAgain
offlineMember
just need some clarification on a basic question here from Becker F4: what is the difference between the 2? actual/expected (respectively) deductions from AR?
CPABear
offlineMember
1) To record a reserve for estimated uncollectible accounts:
Dr. Bad Debt Expense (Income St.)
Cr. Allowance for Doubtful Accounts (Balance Sheet - Contra A/R)
2) To write-off actual uncollectible accounts:
Dr. Allowance for Doubtful Accounts (B/S)
Cr. A/R (B/S)
Entry 1 is the estimate (recording an allowance for uncollectible accounts. As the Becker book mentions, there's 2 ways to get to this. Either you calculate what the ending balance in allowance should be based on your A/R (in which case you would have to back in to the entry required for #1) or you based it on a % of current period sales (in which case the amount you calculate is amount used for entry #1). Entry #2 is the actual write-off when for example, you find out a customer went out of business. As you can see there's no Income Statement impact when you write-off & no effect on net A/R.
CannotPassAgain
offlineMember
okay so I was pretty close with write offs being the actual reduction of AR and allowance for doubtful/uncollectible accounts being an estimate in reduction of AR. thanks for the clarification and elaboration. man i think my brain was just fried at the end of the day after 10.5 hours @ starbucks today..
thanks bro
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