Accounting Coach

$4100 will be recoded in both income statement(profit and Loss account) as revenue and in balance sheet as cash asset that is current asset and the remaining amount that is $16,400 only in balance sheet as amount receivable also in current asset side as you have won it but don't have the receipt only and the bank charges wont affect your financial statement as in he was the one going to incur those expenses

This is a tool used to keep track of adjustment expense so that the transaction will be allocated properly between the two periods.

Oh, cool man thank you, I'm taking an online class and is very fast. Most of the time the teacher is too busy to answer simple questions....thank you

Welcome Mr. Julio

Hello Mrs. Vanderpool I trust that you are doing good. I am going to try my best to answer your question.

In the process of making a provision for doubtful debt as a percentage of A/C receivables its normally a management decision that would dictates that amount. In making this decision prior collections and customers payment patterns need to be considered.

After that is done and you arrived at your decision, then the process of making the provision can be done.... See More

Now here is an examples.

credit sales

A J $ 15,000.00
J A $ 25,000.00
C J $ 30,000.00
R J $ 150,000.00

Total Credit sales is $ 220,000.00. Now I am in business for four years and these four persons are my debtors. Say for example, in passed collections AJ, CJ, & RJ always pay 80% of there bill and J A only pays 60%. Then in this fashion I will know that there will a provision of $ 49,000.00 each month.

Entry



DR CR
Bad debt Expense $ 49,000.00

Provision for doubtful Debt $ 49,000.00

Write of

Provision for Doubtful Debt $ 49,000.00
A/C Rece $ 49,000.00

So the provision is booked. Let say that we received $ 35,000.00 of this money form our customers.

The two basic way to record a recovery of doubtful account is to (A) Reverse the write-off by the said amount and (A) Reduce Account receiveables by the said amount.

A/C Rece $ 35,000.00

Provision for dobutful debt $ 35,000.00

Cash $ 35,000.00

A/C Rece $ 35,000.00

This would have complete the process of making the provision, writting it off and recovering aportation. In accounting bad debt the direct write-off system is not use widely as it deviate the amount recored as income and is therefore not a GAAP, however the provision process re-afirms conservatism and is therefore widely used. Hope this help.

I think so, isn't the interest considered short term or something like that.

The current portion would need adjustment if there is a difference in the notes and current liability. The note payable document has to match the current portion on the books at all times

I would recommend reading part 3 of our topic Inventory and Cost of Goods Sold:
http://www.accountingcoach.com/online-accounting-course/12Xpg03.html

Thanks Ahmed, what is capital component and proportinal weight, when we are talking about like inventory stuff? i'm confused

what problem?