allowance for doubtful accounts and bad debt expense - july 2016 (1)
TRANSCRIPT
ALLOWANCE FORDOUBTFUL ACCOUNTS
ANDBAD DEBT EXPENSE
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I n t h i s s e c t i o n w e w i l l c o v e r :uraccounted4accounting.com
What data do youneed?
I n t h i s s e c t i o n w e w i l l c o v e r :
What data do you need?
The income statementapproach
uraccounted4accounting.com
I n t h i s s e c t i o n w e w i l l c o v e r :
What data do you need?
The income statementapproachThe balancesheet approach
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SalesEnding A/RBeginning AllowanceWrite Offs
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YOU NEED
SalesEnding A/RBeginning AllowanceWrite Offs
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YOU NEED
SalesEnding A/RBeginning AllowanceWrite Offs
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YOU NEED
SalesEnding A/RBeginning AllowanceWrite Offs
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YOU NEED
Bad Debt ExpenseEnding Allowance
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YOU CAN GET TO
Bad Debt ExpenseEnding Allowance
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YOU CAN GET TO
% SALES
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INCOMESTATEMENTAPPROACH
% A/R
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BALANCESHEET
APPROACH
EXAMPLE
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Sales = $1,000,000Ending A/R = $150,000Beginning Allowance = $25,000Write Offs = $20,000
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=
$20,000
$1,000,000* 2%
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Bad Debt Expense $20,000
Allowance For BD $20,000
RESULT
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Bad Debt Expense =$20,000Ending Allowance = $25,000
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BAD DEBTS=
2% OF SALES
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Bad Debt Expense $25,000
Allowance For BD $25,000
RESULT
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Bad Debt Expense =$25,000Ending Allowance =$30,000
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ALLOWANCE=
20% OF SALES
R e c a p o f w h a t w e c o v e r e d :
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Sales, ending a/r, beginningallowance and write offs
R e c a p o f w h a t w e c o v e r e d :
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Sales, ending a/r, beginningallowance and write offsIncome statementapproach focuses on baddebt expense
R e c a p o f w h a t w e c o v e r e d :
uraccounted4accounting.com
Sales, ending a/r beginningallowance and write offsIncome statement approachfocuses on bad debtexpenseBalance sheet approachfocuses on the allowance
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