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Chapter 17-1

QuestionAnswer
What does a business sell on account? To encourage sales
What does the allowance method of recording losses from uncollectible accounts attempt to do? Match the expense of uncollectible accounts in the same fiscal year the related sales are recorded
Since a business does not know what accounts will be uncollectible at the end of the year, what do they do? The business makes an estimate
The estimate of uncollectible accounts expense is usually calculated on what? Percentage of TOTAL SALES ON ACCOUNT
Previous numbers are normally used to determine the percentage of uncollectible accounts but if there is no previous data, what percentage is used? 1%
What kind of account is Allowance for Uncollectible Accounts? It is a CONTRA asset account
Allowance for uncollectible accounts is planned where? On the worksheet as an adjustment. Then it is journalized.
When the adjustment for uncollectible accounts is made, what is debited? The account "Uncollectible Accounts Expense" is debited. This increases this expense account.
When the adjustment for uncollectible accounts is made, what is credited? The account "Allowance for Uncollectible Accounts" is credited. This is a contra asset account and increases with a credit.
The adjust entry for Uncollectible accounts is made where? General Journal under the adjusting entries
Once the adjusting entry for Uncollectible account is posted to the Ledger, the BOOK value of Accounts Receivables is determined how? Accounts Receivable-Balance of Allowance for Uncollectible Accounts=Book Value of Accounts Receivable
Created by: lbeddow