Archive about 'Bad Debt & Allowance For Doubtful Accounts & Provision'

Should Bad Debts Be Written Off Against The Provision For Doubtful Debt?

I have a question. Isn’t it proper to write off any bad debts against the provision account?

Answer:
 
There are two scenario when writing off bad debts:
 
(a) where earlier provision or allowance has been created
(b) where no provision is created and the bad debts need to be directly written off into Income Statement ( not a good [...]

Content Page On Bad Debt And Provision

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Different Methods Of Creating Provision For Doubtful Debts

Accounting Treatment For the Increase Or Decrease Of Provision For Doubtful Debts

Difference Between Bad Debts Written Off And Provision For Doubtful Debts

Accounting Treatment-Work Flow On Write Off On Bad Debts
 

Accounting Test Question BD1 On Accounts Receivables & Bad Debt/Provision

Answer to Accounting Test Question [...]

Answer To Accounting Question BD Test No 2 On Accounts Receivables And Bad Debts

Answer to Question BD Test No 2(a):
To record monthly bad debt expenses accrual summary.

Debit: Bad debt expense (2% x $4,200,000) $84,000
Credit: Allowance for uncollectible accounts    $84,000
To record year 2005 accounts receivable write offs.

Debit : Allowance for uncollectible accounts $90,000
Credit: Accounts receivable  $90,000
Answer to Question BD No 2(b):
Debit: Bad debt expense  $22,600
Credit: Allowance for uncollectible [...]

Accounting Test No BD 2 : Accounts Receivable And Bad Debts

Question No BD 2:
Company XYZ uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by applying 2% times the amount of credit sales for the month. At the year end Dec 31st, an ageing of accounts receivable is prepared and the allowance for uncollectible accounts [...]

Answer To Accounting Question BD No 1 On Accounts Receivables And Bad Debts

Answer to Question No BD 1(a):
Being write off of accounts receivables.
Debit : Allowance for uncollectible accounts $64,000
Credit: Accounts receivable $64,000
Being bad debt expense for the year.
Debit : Bad Debt Expense $46,000
Credit: Allowance for uncollectible accounts $46,000

Computation of bad debt expense for the year:
Allowance for uncollectible accounts  b/f 1/1/05 $68,000
Less: Receivables written off ($64,000)
Balance, before adjusting [...]

Accounting Test No BD 1 : Accounts Receivable And Bad Debts

Question No BD 1:
Company XYZ offers credit terms to its customers. At 31/12/2005, accounts receivable totaled $2,500,000. The allowance method is used to account for uncollectible accounts. At the beginning of the year, the allowance for uncollectible accounts had a credit balance of $68,000. $64,000 Accounts receivable written off during the year. No previously written [...]

Difference Between Bad Debts Written Off And Provision For Doubtful Debts.

WHAT IS BAD DEBT WRITTEN OFF?

Nowadays the company needs to extend credit to its customers. If the company insists on cash term, it will drive away the customers. This might be worsened if other competitors are able to extend generous credit terms to the customers.
In the real world of doing business, there will definitely be some [...]

Accounting Treatment For The Increase Or (Decrease) Of Provision For Doubtful Debts

INCREASE IN PROVISION FOR DOUBTFUL DEBTS:

Assuming earlier in Quarter 1, we have created a provision for doubtful debts of $100,000. Say,at end of Quarter 2, we have reviewed our trade debtors and wanting to increase the provision by an additional amount $50,000.
How should we do it ?
For Quarter 1,
The Original Entry is:
Debit : Provision for doubtful [...]

Different Methods Of Creating Provision For Doubtful Debts

METHOD 1: GENERAL PROVISION BASED ON AS % OF CLOSING TRADE DEBTORS BALANCE

This methodology is normally called general provision for doubtful debts
The term general is because there is NO SPECIFIC identification of the trade debtors who has really turn back.
This estimate is based on past trend or management in-depth understanding of the industry

Illustration:
Say, at Year End [...]