Explanation 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. 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. Write-off: Write-off refers to deduction of a certain amount from accounts receivable, when it becomes uncollectible. Prepare the journal entry to record the collection of cash and write-off of uncollectible accounts, under direct allowance method. Date Particulars Debit Credit June 2 Cash $1,200 Allowance for doubtful accounts $4,000 Account receivable – Person M $5,200 (To record cash collection and write-off of uncollectible account receivable ) Table (1) To record the collection of cash on account, cash account must be increased and accounts receivable must be decreased by $1,200. To record this write-off of uncollectible receivables under allowance method, both allowance for doubtful accounts and accounts receivable must be decreased by $4,000. Hence, Increase in cash (asset account) is debited with $1,200 Decrease in Allowance for doubtful accounts (contra-asset accounts) is debited with $4,000, and Decrease in accounts receivable (asset account) is credited with ( $ 1 , 200 + $ 4 , 000 ) $5,200

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Journalize the collection of $1,200 cash and write-off of Person M’s $4,000 of remaining uncollectible accounts, using allowance method.

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Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License

Journalize the collection of $1,200 cash and write-off of Person M’s $4,000 of remaining uncollectible accounts, using allowance method.

Solution Summary: The author explains the allowance method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period.

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Journalize the collection of $1,200 cash and write-off of Person M’s $4,000 of remaining uncollectible accounts, using allowance method.

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