Collection of Account Written Off—Direct Write-Off Method Como's Music Store uses the direct write-off method in accounting for uncollectible accounts. 20-1 May 8 Wrote off $1,715 owed by Vickie Lawrence, who has no assets. July 15 Wrote off $1,400 owed by Dan Utter, who has made no payments in more than a year. Sept. 2 Reinstated the account of Vickie Lawrence, which had been written off on May 8, and received $1,715 cash in full settlement. 20-2 May 5 Reinstated the account of Dan Utter, which had been written off in the previous year, and received $1,400 cash in full settlement. Record the transactions in general journal form.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Collection of Account Written Off—Direct Write-Off Method
Como's Music Store uses the direct write-off method in accounting for uncollectible accounts.
| 20-1 | |
| May 8 | Wrote off $1,715 owed by Vickie Lawrence, who has no assets. |
| July 15 | Wrote off $1,400 owed by Dan Utter, who has made no payments in more than a year. |
| Sept. 2 | Reinstated the account of Vickie Lawrence, which had been written off on May 8, and received $1,715 cash in full settlement. |
| 20-2 | |
| May 5 | Reinstated the account of Dan Utter, which had been written off in the previous year, and received $1,400 cash in full settlement. |
Record the transactions in general journal form.
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