Bad debts : It refers to the amount that was expected to be received on credit sales but went uncollectible. It is a loss to the company. Allowance for doubtful accounts: It refers to the amount that is use to keep aside by the company as a provision for the part of accounts receivable that may go uncollectible. To explain: The reason of written off a bad debt against the allowance for doubtful accounts not reducing the estimated realizable value of a company’s accounts receivable. Explanation: The writing off a bad debt against the allowance for doubtful accounts does not reduce the estimated realizable value of a company’s accounts receivable. The reason behind it, is that writing off bad debts against allowance for doubtful accounts would have the effect on accounts receivable and allowance for doubtful accounts both with the same amount by leaving the actual difference same between them. The writing off a bad debt against allowance for doubtful accounts includes the journal entry of debiting allowance for doubtful accounts by crediting accounts receivable with the same amount for both the accounts. So, the actual difference between the amount of the two remains the same and that results in neither decrease nor increase in the estimated realizable value of a company’s accounts receivable

Question

I am trying to find the accurate solution to this general accounting problem with appropriate explanations.

Answer 1

Question

Chapter 7, Problem 5DQ

To determine

Bad debts: It refers to the amount that was expected to be received on credit sales but went uncollectible. It is a loss to the company.

Allowance for doubtful accounts: It refers to the amount that is use to keep aside by the company as a provision for the part of accounts receivable that may go uncollectible.

To explain: The reason of written off a bad debt against the allowance for doubtful accounts not reducing the estimated realizable value of a company’s accounts receivable.

Explanation:

The writing off a bad debt against the allowance for doubtful accounts does not reduce the estimated realizable value of a company’s accounts receivable.

The reason behind it, is that writing off bad debts against allowance for doubtful accounts would have the effect on accounts receivable and allowance for doubtful accounts both with the same amount by leaving the actual difference same between them.

The writing off a bad debt against allowance for doubtful accounts includes the journal entry of debiting allowance for doubtful accounts by crediting accounts receivable with the same amount for both the accounts.

So, the actual difference between the amount of the two remains the same and that results in neither decrease nor increase in the estimated realizable value of a company’s accounts receivable

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

I am trying to find the accurate solution to this general accounting problem with appropriate explanations.

Scarlett Manufacturing uses the number of machine hours to allocate overhead costs to products. In a typical month, 8,400 machine hours are expected, and the average monthly overhead costs are $7,560. During March, 8,100 machine hours were used, and total overhead costs were $7,290. Required: Compute Scarlett's predetermined overhead rate and the amount of applied overhead for March. Round your answers to the nearest cent.

Hello tutor please given General accounting question answer do fast and properly explain all answer