Assume that you have a company. And the management team estimates that 3% of sales will be uncollectible. Give any amount of sales and prepare the journal entry using the percent of sales method.

Expert Solution

Particulars		Debit	Credit
A	Bad Debt Expense	3% of sales
	Allowance for Doubtful Accounts		3% of sales
	(being the bad debt written off)

B	Allowance for Doubtful Accounts	3% of sales
	Accounts Receivable		3% of sales

Note:

1) Bad debt expenses are only recorded when the company posts the estimates of uncollectable balances due from customers, but not when bad debts are actually written off.

2) No amount is given in question. So it is taken as 3% of sales.

Junaid answered 2 years ago

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