When the allowance method of recognizing bad debt expense is used, the allowance for doubtful accounts decrease when Specific account receivable is collected Account previously written off is collected Account previously written off becomes uncollectible Specific uncollectible account is written off
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.
When the allowance method of recognizing
Specific
Account previously written off is collected
Account previously written off becomes uncollectible
Specific uncollectible account is written off
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