1.

Reconciliation of Bank Balances

At the end of each calendar month the bank supplies each customer with a bank
statement (a copy of the bank's account with the customer) together with the
customer's checks that the bank paid during the month.19 If neither the bank nor
the customer made any errors, if all deposits made and all checks drawn by the
customer reached the bank within the same month, and if no unusual transactions
occurred that affected either the company's or the bank's record of cash, the
balance of cash reported by the bank to the customer equals that shown in the
customer's own records. This condition seldom occurs due to one or more of the
reconciling items presented below.
Reconciling Items
Deposits in Transit. End‐of‐month deposits of cash recorded on the
depositor's books in one month are received and recorded by the bank in the
following month.
Outstanding Checks. Checks written by the depositor are recorded when
written but may not be recorded by (may not “clear”) the bank until the next
month.
Bank Charges. Charges recorded by the bank against the depositor's balance
for such items as bank services, printing checks, not‐sufficient‐funds (NSF)
checks, and safe‐deposit box rentals. The depositor may not be aware of these
charges until the receipt of the bank statement.
Bank Credits. Collections or deposits by the bank for the benefit of the
depositor that may be unknown to the depositor until receipt of the bank
statement. Examples are note collection for the depositor and interest earned
on interest‐bearing checking accounts.
Bank or Depositor Errors. Errors on either the part of the bank or the part of
the depositor cause the bank balance to disagree with the depositor's book
balance.
Hence, a company expects differences between its record of cash and the bank's
record. Therefore, it must reconcile the two to determine the nature of the
differences between the two amounts.

A bank reconciliation is a schedule explaining any differences between the

bank's and the company's records of cash. If the difference results only from
transactions not yet recorded by the bank, the company's record of cash is
considered correct. But, if some part of the difference arises from other items,
either the bank or the company must adjust its records.

2.
Direct Write-Off Method for Uncollectible Accounts
Under the direct write-off method, when a company determines a particular
account to be uncollectible, it charges the loss to Bad Debt Expense. Assume, for
example, that on December 10 Cruz Ltd. writes off as uncollectible Yusado's
NT$8,000,000 balance. The entry is:
10/12 Bad Debt Expense 8,000,000
Accounts Receivable (Yusado) 8,000,000
 (To record write-off of Yusado account)

Under this method, Bad Debt Expense will show only actual losses from
uncollectibles. The company will report accounts receivable at its gross amount.
Supporters of the direct write-off-method (which is often used for tax purposes)
contend that it records facts, not estimates. It assumes that a good account
receivable resulted from each sale, and that later events revealed certain accounts
to be uncollectible and worthless. From a practical standpoint, this method is
simple and convenient to apply. But the direct write-off method is theoretically
deficient. It usually fails to record expenses as incurred and does not result in
receivables being stated at cash realizable value on the statement of financial
position. As a result, using the direct write-off method is not considered appropriate, except
when the amount uncollectible is immaterial.

Allowance Method for Uncollectible Accounts

The allowance method of accounting for bad debts involves estimating
uncollectible accounts at the end of each period. This ensures that companies
state receivables on the statement of financial position at their cash realizable
value. Cash realizable value is the net amount the company expects to receive in
cash. At each financial statement date, companies estimate uncollectible accounts
and cash realizable value using information about past and current events as well
as forecasts of future collectibility. As a result, the statement of financial position
reflects the current estimate of expected uncollectible account losses at the
reporting date, and the income statement reflects the effects of credit deterioration
(or improvement) that has taken place during the period.
Recording Estimated Uncollectibles
To illustrate the allowance method, assume that Brown Furniture in 2019, its first
year of operations, has credit sales of ￡1,800,000. Of this amount, ￡150,000
remains uncollected at December 31. The credit manager estimates that ￡10,000
of these sales will be uncollectible. The adjusting entry to record the estimated
uncollectibles (assuming a zero balance in the allowance account) is:
31/12/2019 Bad Debt Expense 10,000
Allowance for Doubtful Accounts 10,000
(To record estimate of uncollectible accounts)
Brown reports Bad Debt Expense in the income statement as an operating
expense. Thus, Brown records the increased estimated uncollectibles as bad debt
expense in the period of credit deterioration

3.
1. The allowance method of accounting for bad debts involves estimating
uncollectible accounts at the end of each period. This ensures that companies
state receivables on the statement of financial position at their cash realizable
value. Cash realizable value is the net amount the company expects to receive in
cash. At each financial statement date, companies estimate uncollectible accounts
and cash realizable value using information about past and current events as well
as forecasts of future collectibility. As a result, the statement of financial position
reflects the current estimate of expected uncollectible account losses at the
reporting date, and the income statement reflects the effects of credit deterioration
(or improvement) that has taken place during the period.
Many companies set their credit policies to provide for a certain percentage of
uncollectible accounts. (In fact, many feel that failure to reach that percentage
means that they are losing sales due to overly restrictive credit policies.) Thus, the
IASB requires the allowance method for financial reporting purposes when bad
debts are material in amount. This method has three essential features:
1. Companies estimate uncollectible accounts receivable and compare the new
estimate to the current balance in the allowance account.
2. Companies debit estimated increases in uncollectibles to Bad Debt Expense
and credit them to Allowance for Doubtful Accounts (a contra asset account)
through an adjusting entry at the end of each period.
3. When companies write off a specific account, they debit actual uncollectibles
to Allowance for Doubtful Accounts and credit that amount to Accounts
Receivable.

2.
a. metode penghapusan langsung (direct write-off method)
Kelemahan metode penghapusan langsungadalah tidak mencocokkan biaya yang dikorbankan
dengan pendapatn yang diperoleh pada periode yang bersangkutan. Dalam metode ini, piutang
yang disajikan di neraca hanya sebesar nilai bruto piutang tanpa adanya pengurangan terhadap
piutang yang diakui tidak dapat ditagih kembali. Penggunaan metode penghapusan langsung
tidak dapat menunjukkan dalam neraca jumlah piutang yang diharapkan dapat ditagih karena
neraca hanya menunjukkan jumlah bruto piutang. Selain itu, menurut metode penghapusan
langsung, penjualan yang terjadi mendekati akhir periode akuntansi tidak diakui tidak tertagih
atau diakui dapat ditagih sampai periode yang berikutnya. Hal ini mengakibatkan munculnya
biaya yang terlalu tinggi pada periode yang berikutnya karena piutang tak tertagih tidak diakui
pada periode tersebut. Akibatnya biaya pada periode yang bersangkutan dicatat terlalu rendah
sedangkan biaya pada periode berikutnya dicatat terlalu tinggi.
Kelebihandari metode penghapusan langsung ini adalah sederhana dan mudah digunakan
khususnya dalam penentuan besarnya kerugian piutang karena metode ini bersifat objektif
dimana piutang akan dihapuskan pada waktu terbukti tidak tertagih lagi. Metode penghapusan
langsung yang dilakukan oleh perusahaan dalam mengakui besarnya piutang tak tertagih pada
setiap periode akuntansi tidak dapat menaksir kerugian piutang tak tertagih secara tepat. Metode
ini bertentangan dengan Standar Akuntansi Keuangan karena metode ini tidak dapat memberikan
16 16 penandingan (matching) pendapatan dengan beban periode berjalan dan tidak melaporkan
jumlah piutang dari nilai bersih piutang yang dapat direalisasikan.

b. metode penyisihan (allowances method).

Kelebihan dari metode cadangan ini adalah:
- Metode cadangan perhitungannya lebih memuaskan dalam segi penandingan karena metode ini
akan menghitung piutang yang tidak tertagih untuk periode yang sama dengan terjadinya
penjualan kredit sehingga dapat dilakukan penghitungan terhadap piutang yang diestimasi
(diperkirakan) tidak dapat ditagih kembali.
- Penggunaan estimasi (taksiran) terhadap piutang tak tertagih yang dilakukan dalam metode ini
akan dapat menentukan persentase jumlah taksiran piutang tak tertagih. Persentase ini
diramalkan berdasarkan pengalaman masa lalu, kondisi pasar sekarang, dan analisis atas saldo
piutang yang benar.
kelemahan dari metode cadangan iniadalah bila etimasi tidak dilakukan secara cermat, maka
akan memberikan gambaran biaya kerugian piutang yang tidak tepat sehingga metode ini akan
gagal untuk mempertemukan antara biaya penghapusan dengan jumlah penjualan yang maneaba
penghapusan tersebut

3
At each financial statement date, companies estimate uncollectible accounts
and cash realizable value using information about past and current events as well
as forecasts of future collectibility. As a result, the statement of financial position
reflects the current estimate of expected uncollectible account losses at the
reporting date, and the income statement reflects the effects of credit deterioration
(or improvement) that has taken place during the period. Impact of allowance method will
decrease account receivable in statement of financial position

4
In my opinion, ABC Company is right to choose the allowance method because it can describe
the realized value of the company's receivables and the value of receivables remains material.