Chapter 7, Problem 9E

To determine

Allowance Method for Accounts Receivable:

This is a method of accounting for writing off bad debts expense by debiting the allowance for doubtful accounts and crediting the accounts receivable account which results no change in the income statement as both accounts come under balance sheet.

Journal Entry:

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.

a.

To prepare: Adjustment entry to record the given transactions for uncollectible.

b.

To determine

To prepare: Journal entry to reinstate account and for amount of cash received.