Chapter 8, Problem 6Q

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Other receivables

Common types of receivables other than accounts receivable or note receivable are known as other receivables.

Common types of other receivables are as follows:

• Interest receivables
• Loan to company officers
• Advances to employees
• Income taxes refundable

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To identify: The types of receivables reported by Incorporation T on its balance sheet.

To determine

To identify: whether Incorporation T uses allowance method or the direct write-off method to record uncollectable.