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Accounts Receivable Structured Manners

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1) Why does the allowance method require an estimate of the uncollectible accounts at year-end? Expand on response...NO PLAGARISM
2) Compare and contrast the allowance and write-off methods. Expand on response...NO PLAGARISM

3) Identify two accounts receivable ratios. Provide a numerical example for each. Expand on response...NO PLAGARISM

Textbooks
Introduction to Financial Accounting, 11/E, Charles T. Horngren, Stanford University, Gary L. Sundem, University of Washington, John A. Elliott, Baruch College, The City University of New York, Donna Philbrick, Portland State University,ISBN-10: 0133489361 | ISBN-13: 9780133489361 ©2014 • Prentice Hall • Cloth, 648 pp

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Three questions related to accounts receivables are explained in a structured manner in this response. The answer includes references used.

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In compliance with BrainMass rules this is not a hand in ready assignment but is only guidance.

1) The allowance method requires an estimate of the uncollectable accounts at the end of the year because under this method specific customer's accounts receivables are identified as uncollectible and are written off by removing the account from accounts receivable. The estimate has to be made because doubtful debts are not written off and this method follows the matching principle of accounting. This estimate is made because the possibility of bad debt expense is recognized before the debts actually become uncollectible. The doubtful debts are estimated because bad debts have become probable but have actually not occurred. The journal entry credits accounts receivable and debits allowance for doubtful accounts. The estimate has to be made ...

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Hatim Baxamusa, MBA
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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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