century 21 accounting © 2009 south-western, cengage learning lesson 7-2 allowance method of...
TRANSCRIPT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 7-2LESSON 7-2
Allowance Method of Recording Uncollectible Accounts Expense
Allowance method of recording uncollectible accounts expenseEstimating uncollectible accounts expense using a percentage of net salesEstimating uncollectible accounts expense using a percentage of accounts receivableEstimating the balance of uncollectible accounts by aging accounts receivableWriting off an uncollectible accountCollecting a written-off account
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Chapter 7 ObjectivesChapter 7 ObjectivesAccounting for Uncollectible AccountsAccounting for Uncollectible Accounts
After studying Chapter 7, you will be able to:Define accounting terms related to uncollectible accounts.Identify accounting concepts and practices related to uncollectible accounts.Calculate and record estimated uncollectible accounts expense using the direct write-off method.Calculate and record estimated uncollectible accounts expense using the allowance method.Calculate and analyze accounts receivable turnover ratios.
2
LESSON 7-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Lesson 7-2Lesson 7-2
allowance method of recording losses from uncollectible accounts: crediting the estimated value of uncollectible accounts to a contra account
aging accounts receivable: analyzing accounts receivable according to when they are due
3
LESSON 7-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
4
LESSON 7-2
ADJUSTMENT USING THE ADJUSTMENT USING THE PERCENTAGE OF SALES METHODPERCENTAGE OF SALES METHOD page 205
1. Compute the estimated uncollectible accounts expense.
2. Record an adjustment on a worksheet.
Estimated Uncollectible Accounts Expense
=Percentage×Net Sales
$566.43=0.5%×$113,285.75 11
22
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
5
LESSON 7-2
ADJUSTMENT USING AGING OF ADJUSTMENT USING AGING OF ACCOUNTS RECEIVABLEACCOUNTS RECEIVABLE page 206
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
LESSON 7-2
ADJUSTMENT USING PERCENTAGE OF ADJUSTMENT USING PERCENTAGE OF ACCOUNTS RECEIVABLEACCOUNTS RECEIVABLE page 207
2. Compute the total estimate.
3. Compute the addition to the allowance account.
1. Compute an estimate for each age group.
11
22
33
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
7
LESSON 7-2
WRITING OFF AN UNCOLLECTIBLE WRITING OFF AN UNCOLLECTIBLE ACCOUNTACCOUNT—ALLOWANCE METHOD—ALLOWANCE METHOD
January 5. Wrote off Candace Rhode’s past due account as uncollectible, $42.80. Memorandum No. 71.
page 208
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
8
LESSON 7-2
April 5. Received cash in full payment of Candace Rhode’s account, previously written off as uncollectible, $42.80. Memorandum No. 92 and Receipt No. 280.
1. Reopen the account.
2. Record the cash receipt.
COLLECTING A WRITTEN-OFF COLLECTING A WRITTEN-OFF ACCOUNT— ALLOWANCE METHODACCOUNT— ALLOWANCE METHOD page 209
11
22
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
9
LESSON 7-2
DEFINE TERMS REVIEWDEFINE TERMS REVIEWIn QuizletIn Quizlet
allowance method of recording losses from uncollectible accounts
aging accounts receivable
page 210
Edit this set: Chapter 7 AdvAcc (then SAVE)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Exit Ticket for today:Exit Ticket for today:Audit Your Understanding 7-2Audit Your Understanding 7-2
1. What are the two methods commonly used to estimate uncollectible accounts expense?
2. What is the formula for estimating uncollectible accounts expense based on net sales?
3. How is the addition to allowance for uncollectible accounts calculated using the percentage of accounts receivable method?
10
LESSON 7-2
In a Word Document, SaveAS: Chapter7-2AYUYourNameAnd drop in my Inbox today!
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Complete the following assignments for Complete the following assignments for Chapter 7-2 todayChapter 7-2 today
Define Terms Review on page 210. Answer Audit Your Understanding questions on page
210. Complete Work Together 7-2 on Aplia – page 210. Complete On Your Own 7-2 on Aplia – page 210. Complete Application Problem 7-2 on Aplia – page
215. Complete Application Problem 7-3 on Aplia – page
215-216. Complete Application Problem 7-4 on Aplia – page
216.
11
LESSON 7-2