Question

An accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the estimated amount of cash to be collected is the:Select one:a. Allowance method of accounting for bad debts.b. Aging of notes receivable.c. Adjustment method for uncollectible debts.d. Direct write-off method of accounting for bad debts.e. Cash basis method of accounting for bad debts.

Answer 1

a. Allowance method of accounting for bad debts

Step-by-step explanation:

This method reduce the amount of the account receivable balance by an estimation of how much of the account receivable will never be collected.

The entry to the accounting system will be a debit to Bad Debts Expense

and credit to Allowance for Doubtful Accounts.

When a debt is written-off the entry it's to credit Allowance for Doubtful Accounts then a debit to account receivable to recognize the loss.