Amounts due from customers for credit sales

Subsidiary Accounts Receivable

The total accounts receivable balance can be broken down into several SUBSIDIARY accounts. Each subsidiary account represents the specific portion of accounts receivable for each individual customer

When selling goods to a customer who pays with a credit card, there is typically a credit card surcharge or processing fee. The fee is a direct decrease in the amount of cash that the business will receive

When a customer does not pay their Accounts Receivable, the uncollectible amount is called a bad debt. (Customer owes us, but we do not collect) (Expense associate with selling on credit)

Direct Write-Off Method

This is a method to write-off bad debts. In this method, the bad debts are written off directly to bad debt expense Dr. Bad Debt Expense Cr. Accounts Receivable

This is a method to write-off bad debts. In this method, bad debts are estimated at year-end and used to replenish the Allowance for Doubtful accounts. When a bad debt is written off, Dr. Allowance for Doubtful Accounts Cr. Accounts Receivable

Allowance for Doubtful Accounts

Used to adjust Accounts Receivable to its realizable value. There are three methods used to estimate bad debts under the Allowance Method. Percent of Sales, Percent of Receivable, and Aging of Receivable

Recognize anytime we lend money to a customer or borrower- typically for long term periods of time. The account keeps track of the amount the borrower owes us, just like Accounts Receivable. Notes Receivable require periodic interest and principal payment

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ACCTG Exam 3 Terms

Question	Answer
Accounts Receivable	Amounts due from customers for credit sales
Subsidiary Accounts Receivable	The total accounts receivable balance can be broken down into several SUBSIDIARY accounts. Each subsidiary account represents the specific portion of accounts receivable for each individual customer
Credit Card Sales	When selling goods to a customer who pays with a credit card, there is typically a credit card surcharge or processing fee. The fee is a direct decrease in the amount of cash that the business will receive
Bad Debts	When a customer does not pay their Accounts Receivable, the uncollectible amount is called a bad debt. (Customer owes us, but we do not collect) (Expense associate with selling on credit)
Direct Write-Off Method	This is a method to write-off bad debts. In this method, the bad debts are written off directly to bad debt expense Dr. Bad Debt Expense Cr. Accounts Receivable
Allowance Method	This is a method to write-off bad debts. In this method, bad debts are estimated at year-end and used to replenish the Allowance for Doubtful accounts. When a bad debt is written off, Dr. Allowance for Doubtful Accounts Cr. Accounts Receivable
Allowance for Doubtful Accounts	Used to adjust Accounts Receivable to its realizable value. There are three methods used to estimate bad debts under the Allowance Method. Percent of Sales, Percent of Receivable, and Aging of Receivable
Note Receivable	Recognize anytime we lend money to a customer or borrower- typically for long term periods of time. The account keeps track of the amount the borrower owes us, just like Accounts Receivable. Notes Receivable require periodic interest and principal payment

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