Question

Charleston, Inc. has Accounts Receivable of $300,000 and an Allowance for Doubtful Accounts of $20,000. If it writes-off a customer account balance of $2,000, what is the amount of its net accounts receivable?

Answer 1

$280,000

Step-by-step explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

The net receivable is the difference between the accounts receivable and the allowance for doubtful debt balance. The amount written off would be deducted from the two balances as expressed.

Allowance balance = $20,000 - $2,000

= $18,000

Accounts receivable balance = $300,000 - $2,000

= $298,000

Net accounts receivable = $298,000 - $18,000

= $280,000

Answer 2

Answer: $280,000

Step-by-step explanation:

Net Accounts receivable as you probably already know is the amount that the company will receive from credit customers when they paid for the purchases goods they have from the company.

It is also Standard Accounting Practice to provide for an Allowance for Doubtful Accounts because of the risk that Credit Sales will not be received. The amount in this account is one that the company expects it will not receive from it's credit Sales.

Calculating the Net Accounts Receivable is therefore as follows,

Net Accounts Receivable = Gross Accounts receivable - Allowance for Doubtful Accounts

Plugging in the figures we will have,

= 300,000 - 20,000

= $280,000

You might be wondering why there is no treatment for the $2,000 written off by the business in the Net Accounts Receivable calculation.

This is simply because the $2,000 is already included in the Allowance for Doubtful Debt amount and so there is no need to include it again.