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ACCT 140-45 ACCT140-45 ACCT/140-45 Notes #12 [10-20-16] – Read Ch 8

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ACCT 140-45 ACCT140-45 ACCT/140-45 Notes #12 [10-20-16] – Read Ch 8

Read Ch. 8
PA 8-1, 8-5
S 5-1[MANUAL] S 7-2
Uncollectible Accounts Receivable [Expense] – cost of doing business
Adjusting journal
Debit Bad Debts, Uncollectible A/C, Doubtful A/C (+Exp, -RE)Credit Allowance for “ (+ XA, – A)
Income Statement Approach
Matching principle
The higher sales revenue is, the larger the expense should be
Focus on making the I/S “right”

Description

ACCT 140-45 ACCT140-45 ACCT/140-45 Notes #12 [10-20-16] – Read Ch 8

Read Ch. 8
PA 8-1, 8-5
S 5-1[MANUAL] S 7-2
Uncollectible Accounts Receivable [Expense] – cost of doing business
Adjusting journal
Debit Bad Debts, Uncollectible A/C, Doubtful A/C (+Exp, -RE)Credit Allowance for “ (+ XA, – A)
Income Statement Approach
Matching principle
The higher sales revenue is, the larger the expense should be
Focus on making the I/S “right”
Determines what debit part of Adj
Take current year’s Sales multiply it by a % based on past experience to determine what the expense should be (Record it as the expense is zero)
Balance Sheet Approach
Focuses on making the B/S “right”
The larger Acc Receivable is the larger the Allowance should beTakes this year’s Accounts Receivable