thank you so much but i have another lecturer told me to realize the bad debt (allowance method), Dr Bad debt expense, Cr AR, which i dont think its correct?
Hi there, no that is definitely not correct under the allowance method. That’s what’s known as the Direct Write-Off method, which isn’t allowed under US GAAP, but may be permissible for companies that don’t adhere to US GAAP.
kinda late here 😄 and I dont expect a reply but what value would be debited as Allowance D/A if we were to actually receive 800 and they are not expected bad debt anymore
Hi there! If the company had collected enough of the AR that it doesn’t expect any of the remaining balance to be uncollectible, it simply wouldn’t record a Bad Debt/Allowance for Doubtful Accounts journal entry. Also, I don’t cover it in this video, but if the company had already recorded an allowance, then collected the money such that no more write-off was expected, it would record a journal entry where it actually reverses (takes away) the existing allowance.
Hi there, the 800 will remain in A/R until known to be uncollectible (like the 200), and the company will maintain an 800 Allowance for as long as it continues to believe the 800 won’t be collected. Hope this helps!
Immediately below their corresponding asset. For example, accumulated depreciation (contra asset) goes immediately below the asset being depreciated. Alternatively, you may see assets displayed at “net book value” which has the asset and related contra-account netted into a single amount, with the details of the separate asset and contra-asset valuations disclosed in the notes to the financial statements.
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Great explanation, many thanks.
Very helpful thank you so much
More information your explanation
thank you so much but i have another lecturer told me to realize the bad debt (allowance method), Dr Bad debt expense, Cr AR, which i dont think its correct?
Hi there, no that is definitely not correct under the allowance method. That’s what’s known as the Direct Write-Off method, which isn’t allowed under US GAAP, but may be permissible for companies that don’t adhere to US GAAP.
kinda late here 😄 and I dont expect a reply but what value would be debited as Allowance D/A if we were to actually receive 800 and they are not expected bad debt anymore
Hi there! If the company had collected enough of the AR that it doesn’t expect any of the remaining balance to be uncollectible, it simply wouldn’t record a Bad Debt/Allowance for Doubtful Accounts journal entry. Also, I don’t cover it in this video, but if the company had already recorded an allowance, then collected the money such that no more write-off was expected, it would record a journal entry where it actually reverses (takes away) the existing allowance.
thank you so much .
7:44 Hey, 200 is konw to be uncollectible, so 800 is back to AR correct? I am confused.
Hi there, the 800 will remain in A/R until known to be uncollectible (like the 200), and the company will maintain an 800 Allowance for as long as it continues to believe the 800 won’t be collected. Hope this helps!
On the Balance sheet where would you place the Contra assets?
Immediately below their corresponding asset. For example, accumulated depreciation (contra asset) goes immediately below the asset being depreciated. Alternatively, you may see assets displayed at “net book value” which has the asset and related contra-account netted into a single amount, with the details of the separate asset and contra-asset valuations disclosed in the notes to the financial statements.
thank you :)