Uncollectible Accounts Income Statement Approach

Income statement approach lo5 6 the following information relates to a company s accounts receivable.

Uncollectible accounts income statement approach. At the end of two months your friend has not repaid the money. There are two general approaches to estimate uncollectible accounts expense. Income statement approach example. The company uses the allowance method for.

Problem 7 1 uncollectible accounts. Compute bad debt estimation using the balance sheet method of percentage of receivables where the percentage uncollectible is 9. The company uses the allowance method for its uncollectible accounts receivable. The first one is known as aging method or balance sheet approach and the second one is known as sales method or income statement approach.

The following information is from unadjusted trial balance. Sales on account are 250 000 so the estimate for uncollectible accounts is 5 000 250 000 x 02. Brief exercise 7 8 uncollectible accounts. A r 650 000 allowance for uncollectible accounts 3 000 credit sales 2011 2 500 000 percentage of sales estimated.

Swathmore clothing corporation grants its customers 30 days credit. Accounts receivable balance at the beginning of the year 315 000. Income statement and balance sheet approach lo7 5 7 6 swathmore clothing corporation grants its customers 30 days credit. However receivables often become uncollectible because a customer cannot or will not pay.

Under accrual accounting an accounts receivable is recorded on the balance sheet and revenue is booked on the income statement. At the fiscal year end of december 31 an aging of accounts receivable schedule is prepared and the allowance for uncollectible. Prepare the journal entry for the income statement method of bad debt estimation. The sales method also referred to as income statement approach estimates allowance for doubtful accounts using total credit sales for the period.

Under this approach some percentage of the total credit sales for the period is determined to be uncollectible. Here s an example of how this works. Compute bad debt estimation using the income statement method where the percentage uncollectible is 5.