Why there is a need to estimate uncollectible accounts receivable? Explain

Solutions

Expert Solution

Account receivable:

The entity makes sales on credit terms. That Amount will be collected in near future. ie, Account receivables are assets of the entity.

Uncollectible Account Receivable:

Uncollectible Account receivables mean that the receivable not collectible in the future called bad debt. so receivable and Uncollectible Account Receivable is different natures. An account receivable is an asset but uncollectible Account receivable are not an asset.

Need for calculating uncollectible account receivable:

All accounting is done using the matching principle. If we record revenue should record expenses related to such revenue in the current year itself.

there are two methods used for account uncollectible account receivable

1) Direct method:

All uncollectible account receivables deducted from account receivables.

2) Indirect method/Provision

For uncollectible receivables create provision. Charging to Profit and loss account with out deducted for acccoun receivables.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Why does the write-off of uncollectible accounts have no effect on the accounts receivable on the...

Why does the write-off of uncollectible accounts have no effect on the accounts receivable on the balance sheet if bad debts are estimated? If not directly written off as bad debts expense how does a company properly recognize uncollectible receivable activity on the income statement? Why are controls over the cash asset so important? What risks exist if adequate controls are not in place? Why is it important to distinguish between current assets and long term assets? What concerns would...

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began...

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $44,010 and $3,440, respectively. During the year, the company wrote off $2,620 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days Receivables % Likely to be past due amount uncollectible Current $ 70,000 1% 0-30 26,700 5% 31-60 6,760 10%...

Sunland Company uses the allowance method to estimate uncollectible accounts receivable. The unadjusted balance in Allowance...

Sunland Company uses the allowance method to estimate uncollectible accounts receivable. The unadjusted balance in Allowance for Doubtful Accounts is a debit of $5,000. The company produced the following information from aging its accounts receivable at year end. Complete the aging schedule and calculate the total estimated uncollectible accounts. Number of Days Outstanding Total 0–30 31–60 61–90 91–120 Accounts receivable $580,000 $330,000 $120,000 $80,000 $50,000 Estimated % uncollectible 2% 6% 10% 30% Estimated uncollectible accounts $ $ $ $ $...

Analyzing and Reporting Receivable Transactions and Uncollectible Accounts Using Percentage- of-Sales Method to Estimate Bad Debt...

Analyzing and Reporting Receivable Transactions and Uncollectible Accounts Using Percentage- of-Sales Method to Estimate Bad Debt Expense At the beginning of the year, Penman Company had the following account balances. Accounts receivable...................... $356,000 Allowance for uncollectible accounts......... 21,400 During the year, Penman’s credit sales were $2,008,000, and collections on accounts receivable were $1,963,000. The following additional transactions occurred during the year. Feb. 17 Wrote off Bava’s account, $8,200. May 28 Wrote off Reed’s account, $4,800. Dec. 15 Wrote off Fischer’s...

Are uncollectible accounts receivable a normal cost of doing business

Estimating Uncollectible Accounts and Reporting Accounts Receivable Collins Company analyzes its accounts receivable at December 31,...

Estimating Uncollectible Accounts and Reporting Accounts Receivable Collins Company analyzes its accounts receivable at December 31, and arrives at the aged categories below along with the percentages that are estimated as uncollectible. Age Group Accounts Receivable Estimated Loss % 0-30 days past due $110,000 1% 31-60 days past due 40,000 2 61-120 days past due 27,000 5 121-180 days past due 14,000 10 Over 180 days past due 9,000 25 Total accounts receivable $200,000 The balance of the allowance for...

Accounts receivable has a balance of $16,000 and the allowance for uncollectible accounts has a credit...

Accounts receivable has a balance of $16,000 and the allowance for uncollectible accounts has a credit balance of $1,600. What is net accounts receivable before and after a $60 account receivable is written off?

A company’s year-end balance in accounts receivable is $2,000,000. The allowance for uncollectible accounts had a...

A company’s year-end balance in accounts receivable is $2,000,000. The allowance for uncollectible accounts had a beginning-of-year credit balance of $30,000. An aging of accounts receivable at the end of the year indicates a required allowance of $38,000. If bad debt expense for the year was $40,000 and if credit sales for the year were $8,200,000 and $7,950,000 was collected from credit customers, what was the beginning-of-year balance in accounts receivable?

Artis, Inc. uses the aging of accounts receivable method for estimating uncollectible accounts. As of October...

Artis, Inc. uses the aging of accounts receivable method for estimating uncollectible accounts. As of October 31, total Accounts Receivable was $17,800 of which $8,400 was 0 - 30 days old; $5,900 was 31 - 60 days old; and the remainder was over 60 days old. Artis estimates 1% of accounts 0 - 30 days old will be uncollectible; 5% of accounts 31 - 60 days old will be uncollectible; and 15% of accounts over 60 days old will be...

At December 31, Gill Co. reported accounts receivable of $274,000 and an allowance for uncollectible accounts...

At December 31, Gill Co. reported accounts receivable of $274,000 and an allowance for uncollectible accounts of $1,500 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 1% of accounts receivable. The amount of the adjustment for uncollectible accounts would be: $1,500. $1,240. $2,740. $950.

Subjects