Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and a

Question

What records the proper provision for doubtful accounts?

analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. What entries records the proper provision for doubtful accounts?

Answer 1

Your allowance for doubtful debts a/c has a balance of $800 and you want the balance to be $15,000, so you need to charge $14,200 to the income statement. The journal entry:
Dr Doubtful debts (or bad debts) expense $14,200
Cr Allowance for doubtful accounts $14,200

After this adjustment, your income statement will have an expense of $14,200 for doubtful debts and your balance sheet will have an Allowance for doubtful debts a/c balance of $15,000.

Answer 2

Under an aging of accounts receivable, after the adjustment, the balance in allowance for doubtful accounts must show what the estimate for uncollectible accounts expense is. Therefore, you must look at the balance in the allowance account.

In this example, there is a credit balance of 800. You must determine what adjustment would be needed to bring the credit balance to 15,000.

So:
15,000. - 800. = 14,200.

Journal entry:
dr uncollectable accounts expense 14, 200.
cr allowance for doubtful accounts 14,200.

The allowance account now shows 15,000. (14,200. + 800.).

If there was a debit balance of, lets say, 1,000., the adjustment would have to be, 16,000. (15,000. + 1,000. = 16,000). Now when 16,000. is posted to the allowance account, the debit would subtract away and leave a 15,000. credit.

Under the percentage of sales method, you would ignore the balance in the allowance account and simply expense away the estimate. The balance left in the allowance is ignored.

Answer 3

Net sales for the month are ₩800,000,000 and bad debts are expected to be 1.5% of net sales. The company uses the percentage-of-sales basis. If the Allowance for Doubtful Accounts has a credit balance of ₩15,000,000 before adjustment, what is the balance after adjustment?



₩15,000,000

₩27,000,000

₩23,000,000

₩31,000,000

Answer 4

Dr noncollectable accounts expense
Cr doubtful accounts provision