Reporting and Analyzing Receivables
MJC Revised 10-2011 Page 1
Journal Entries for Accounts Receivables Write-off:
Transaction DescriptionJournal EntryAccount Title Debit Credit
Direct write-off methodBad Debt Expense XXXAccounts Receivable XXXTo record estimated uncollectibleaccounts at the beginning of each year.Bad Debt Expense XXXAllowance for Doubtful Accounts XXXTo record the write-off of an uncol-lectible account using the allowancemethod for accounting for receivablesAllowance for Doubtful Accounts XXXAccounts Receivable-clients name XXXTo record the recovery of an uncol-lectible account that has already beenwritten off earlier in the accountingperiodAccounts Receivable-clients name XXXAllowance for Doubtful Accounts XXXCash XXXAccounts Receivable-clients name XXXThe Direct write-off method is not GAAP approved because it fails to match expense with the rev-enues in the period in which they are incurred. The allowance method is derived from an aging of the accounts receivable to determine the dollar amount of accounts receivable, which will go badin any given fiscal period.
Journal Entries for Notes Receivables:
Transaction Description Journal Entry Account Title Debit Credit
To record the making of a notes receiv-able for sale of merchandise Notes ReceivableXXXSales RevenueXXXTo record the making of a notes receiv-able in exchange for a accounts receivable Notes ReceivableXXXAccounts ReceivableXXXTo record the honoring (payment) of anotes receivable at the date of maturitywhen no interest has been accruedCashXXX Notes ReceivableXXXInterest RevenueXXX