1. Explain how to record the recovery of an account previously written off when the direct...

1. Explain how to record the recovery of an account previously written off when the direct write-off method was used.

2. Explain how to record the recovery of an account previously written off when the allowance method was used.

3. Describe the financial statement presentation of both the allowance for uncollectible accounts and the loss from uncollectible accounts

Solutions

Expert Solution

Solution 1:

Recovery of accounts previouslty written off is recorded using direct method as under:

Journal Entries - Bad Debts recovery - Direct Method
Particulars	Debit	Credit
Accounts Receivables Dr	XX
To Bad debts recovered		XX
(Being reinstatement of account previously written off)

Cash Dr	XX
To Accounts Receivables		XX
(Being cash received from debtor previously written off)

Solution 2:

Recovery of accounts previouslty written off is recorded using allowance method as under:

Journal Entries - Bad Debts recovery - Allowance Method
Particulars	Debit	Credit
Accounts Receivables Dr	XX
To Allowance for uncollectible accounts		XX
(Being reinstatement of account previously written off)

Cash Dr	XX
To Accounts Receivables		XX
(Being cash received from debtor previously written off)

Solution 2:

Allowance for uncollectible account is presented in balance sheet as deduction from gross accounts receivables. After deduction net accounts receivables are shown in balance sheet.

Loss from uncollectible accounts is presented in income statement as an expense.

ekkarill92 answered 1 year ago

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