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    Uncollectible accounts: balance sheet approach vs. income statement approach

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    Please help with the following problem.

    In making the annual adjusting entry for uncollectible accounts, a company may utilize a balance sheet approach to make the estimate, or it may use an income statement approach. Explain these two alternative approaches.

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    https://brainmass.com/business/balance-sheet/uncollectible-accounts-balance-sheet-approach-vs-income-statement-approach-39916

    Solution Preview

    Problem: In making the annual adjusting entry for uncollectible accounts, a company may utilize a balance sheet approach to make the estimate, or it may use an income statement approach. Explain these two alternative approaches

    Answer:
    Accounting for Un-collectible Accounts:

    Allowance Method: - recording collection losses on the basis of estimates. There are two methods that can be used to estimate the Un-collectible Accounts expense:

    (1) Percent of Sales - referred to as the Income Statement approach because it computes the un-collectible accounts expense as a percentage of net ...

    Solution Summary

    The following posting helps with financial statements. The solution explains the two methods for allowing for doubtful accounts together with a sample of the entries which would be required.

    $2.19

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