Debtors

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School
University of Florida **We aren't endorsed by this school
Course
ART 2757C
Subject
Accounting
Date
Apr 7, 2023
Pages
4
Uploaded by MateValor10062 on coursehero.com
Debtors' accounts balance = 45000 - 500 = 44500 Allowance for doubtful debts = 44500 × 2% = 890 a) The journal entries Dr/ Bad debts Cr/ Debtors' accounts To write off the customer's account 500 500 Dr/ Allowance for doubtful debts acc. Cr/ Bad debts Charging the bad debts to the allowance acc. 500 500 Dr/ Profit and loss acc. Cr/ Allowance for doubtful debts acc. Charing the profit and loss acc. with bad debts and doubtful debts (500 + 890) 1390 1390 b) The ledger accounts Accounts receivables acc. 500 44500 Bad debts acc. Balance 31/12
Transferred 45000 balance 31/12 45000 45000 Bad debts acc. Debtors' 500 Allowance for doubtful 500 Chapter Two : Accounting adjustments to accounts receivable 43 accounts debts acc. 500 500 Allowance for doubtful debts acc. 500 Profit and loss acc. 1390 890 Bad debts 31/12 Transferred balance 31/12 1390 1390 Profit and loss acc. For the period ended 31/12/2020 Allowance for doubtful 1390 acc. The balance sheet on 31/12/2020 Assets Liabilities Debtors' accounts (-) Allowance for doubtful debts acc.
44500 (-) 890 43610 Chapter Two : Accounting adjustments to accounts receivable 44 In this previous example, we assumed that the company would create the allowance for doubtful debts for the first time, so the profit and loss account was charged with both the bad debts in addition to the doubtful debts at the end of the period, and that the balance of the allowance account at the end of the period is equal to the value of the doubtful debts on that date. But what will be the situation in the following years? In any year other than the first year of making the allowance for doubtful debts, it is expected that there will be bad debts and an allowance from the previous year, and an allowance to be made for the following period, and as it was known, the bad debts are closed in the previous year's allowance, and the company will face one of two possibilities as follows: - The value of the allowance for doubtful debts is equal to the bad debts during this period, and this means that there was an accuracy in estimating this allowance. In this case, the new allowance must be reserved from the profit and loss account with an entry that makes the profit and loss
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