Direct method

ABC Company sell merchandise on account with invoice price 10,000. te

10,000 AR 10,000
0.02 sales 10,000
200
Freight out 1,000
AR 1,000

Payment is within cash discount

Cash 8800
Sales Discount 200
AR

Direct Method

Sales: AR xx
Sales xx

Write off Bad debts Expense xx

AR xx

Recovery AR xx
Bad debts expense xx

Cash xx
AR xx
Accounts Receivable

Sales on account/ Credit Sales: AR

Sales

Collections on Account: Cash

AR

Sales Return and allowances: Sales Return and allowances

AR

Sales Discount/Cash discount Sales Discount

Cash

Ar beg 80,000 430,000

Credit sales 450,000

AR End 100,000
 Allowance
Allowance for uncollectible, beg 45,000 120,000
Allowance for uncollectible, ending 75,000

120,000 120,000

1,000,000 x 3% 30,000 allowance ending

Allowance for bad debts

Write off Allowance for bad debts, beginning
Allowance for bad debts, end Recovery
Bad debts expense
 Allowance for bad debts
Write off Allowance for bad debts, beginning
Allowance for bad debts, end Recovery
Bad debts expense

Allowance for bad debts

Write off Allowance for bad debts, beginning
Allowance for bad debts, end Recovery
Bad debts expense

AR
AR Beginning Sales Return
Credit Sales Collections on account
AR ending
Write off

Equal Equal 12
600,000 5%
40,000 10%
20,000
 Allowance method

ount with invoice price 10,000. terms 2/10 n/30. Shipping fee 1,000, FOB destination, freight collect.

Shipping point - Buyer

Destination - seller

Prepaid - Seller
Collect - Buyer

9,000

Allowance Method

Sales: AR xx
Cash xx Write off
Allowance for bad debts, end
Write off Allowance for bad debts xx
AR xx

Recovery AR xx
Allowance for bad debts xx

Cash xx
AR xx

Adjustment Bad debts expense xx

Allowance for bad debts xx

or
Allowance for bad debts xx

bad debts expense xx

 xx AR
xx 10 AR Beginning Sales Return
2 Credit Sales Collections on account
xx AR ending
xx

urn and allowances xx 12 Equal Equal 12

xx

xx
xx
AR xx

100% Sales 450,000

80% Less: Cost of goods sold 360,000 80%
20% Gross Profit 90,000

Cost of goods sold:

Merchadise inv. Beg
Add: Purchases
COGAS 460,000
Less: Mechandise inv, ending -100,000
COGS 360,000

Collection on Account
AR beg 80,000 430,000 Collection on account
Credit Sales 450,000 0 Sales Returns
100,000 AR end

530,000 530,000

Allowance for uncollectible account

Before the year end adjustment - Beginning
After the year end adjustment - Ending
 Aging:
AR ending x Percentage of allowance = Allowance for bad debts ending
uncollectible accounts expense Ar beg x percentage of allowance = Allowance for bad debts beginning

uncolletible expense 120,000

Allowance for uncollectible 120,000

AR ending x Percentage of allowance = Allowance for bad debts ending

Ar beg x percentage of allowance = Allowance for bad debts beginning

Sales x percentage of allowance = bad debts expense

Allowance for uncollectible account

Before the year end adjustment - Beginning
After the year end adjustment - Ending

allowance ending

Allowance for bad debts

Allowance, beg 8,000 38,000 uncollectible accounts expense
Allowance, end 30,000

38,000 38,000

Bad debts expense 38,000

Allowance 38,000

Accounts receivables, end

Less: Allowance, end
Amortize Cost/ Net realizable value
 Allowance for bad debts
Write off 23,000 28,000 Allowance, beg
Allowance end 20,000 5,000 Recovery
10,000 bad debt expense

43,000 43,000

AR
AR beg 1,300,000 125,000 Write off
Credit sales 5,400,000 4725000 Collection
1,850,000 AR, end

6,700,000 6,700,000

4750000 - 25,000

Accounts receivables, end 1,850,000

ebts, beginning Less: Allowance, end 165,000
Amortize Cost/ Net realizable value 1,685,000

AR
30,000
4,000
14,000
48,000 Allowance ending
 Allowance for bad debts
Allowance for bad debts, beginning
Allowance for bad debts, end Recovery
Bad debts expense
Collection on account
Sales Returns
owance for bad debts ending
ance for bad debts beginning

owance for bad debts ending

ance for bad debts beginning

270,000
20,000
250,000
4725000