Collection of Accounts Written off—Allowance Method Julia Alvarez, owner of Alvarez Rentals, uses the allowance method in accounting for uncollectible accounts. July 7 Wrote off $5,500 owed by Randy Dalzell, who has no assets. Aug. 12 Wrote off $2,500 owed by Jason Flint, who declared bankruptcy. Sept. 27 Reinstated the account of Randy Dalzell, which had been written off on July 7, and received $5,500 cash in full settlement. 1. 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 Accounts Written off—Allowance Method
Julia Alvarez, owner of Alvarez Rentals, uses the allowance method in accounting for uncollectible accounts.
| July 7 | Wrote off $5,500 owed by Randy Dalzell, who has no assets. |
| Aug. 12 | Wrote off $2,500 owed by Jason Flint, who declared bankruptcy. |
| Sept. 27 | Reinstated the account of Randy Dalzell, which had been written off on July 7, and received $5,500 cash in full settlement. |
1. Record the transactions in general journal form.
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