Chapter 7, Problem 3QS

To determine

Journalization:

It means record of financial data related to business transactions in a journal in a manner so that debit equals credit. It provides an audit trail to the auditor and a means to analyze the effects of transactions to an organization‘s financial health.

Rules of journal entry: The rules for journal entry are defined by 5 accounting components,

• Assets: Increase in asset should be debit and decrease should be credit.
• Liabilities: Increase in liabilities should be credit and decrease should be debit.
• Equity: Increase in Equity should be credit and decrease should be debit.
• Expense: Increase in expense should be debit and decrease should be credit.
• Revenue: Increase in revenue should be credit and decrease should be debit.

Accounts receivable: It refers to the amount that is to be received by a company for providing goods and services on credit. It is an asset account.

Write off method for accounts receivable: This is a method of accounting for writing off bad debts expense by directly writing them off from sales revenue for the period for which they are uncollectible. It has impact on both the income statement and as well as the balance sheet as it reduces the amount of accounts receivable.

To prepare: Journal entry to record the unexpected payment from an uncollectible account receivable for which the record has been made with direct write off method.