Allowance for Doubtful Accounts and Bad Debt Expense - July 2016 (1)

ALLOWANCE FORDOUBTFUL ACCOUNTS

ANDBAD DEBT EXPENSE

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What data do youneed?


I n t h i s s e c t i o n w e w i l l c o v e r :

What data do you need?

The income statementapproach



I n t h i s s e c t i o n w e w i l l c o v e r :

What data do you need?

The income statementapproachThe balancesheet approach



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https://www.youtube.com/watch?v=IdNCFq-x260

https://www.youtube.com/watch?v=IdNCFq-x260

SalesEnding A/RBeginning AllowanceWrite Offs

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YOU NEED

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YOU NEED




YOU NEED




YOU NEED


Bad Debt ExpenseEnding Allowance


YOU CAN GET TO


Bad Debt ExpenseEnding Allowance


YOU CAN GET TO


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SALESORA/R



SALESORA/R



% SALES


INCOMESTATEMENTAPPROACH


% A/R


BALANCESHEET

APPROACH


EXAMPLE


Sales = $1,000,000Ending A/R = $150,000Beginning Allowance = $25,000Write Offs = $20,000



2% OF SALES



=

$20,000

$1,000,000* 2%



Bad Debt Expense $20,000

Allowance For BD $20,000


RESULT


Bad Debt Expense =$20,000Ending Allowance = $25,000



BAD DEBTS=

2% OF SALES



20% OF A/R



Bad Debt Expense $25,000

Allowance For BD $25,000


RESULT


Bad Debt Expense =$25,000Ending Allowance =$30,000



ALLOWANCE=

20% OF SALES


R e c a p o f w h a t w e c o v e r e d :


Sales, ending a/r, beginningallowance and write offs




Sales, ending a/r, beginningallowance and write offsIncome statementapproach focuses on baddebt expense




Sales, ending a/r beginningallowance and write offsIncome statement approachfocuses on bad debtexpenseBalance sheet approachfocuses on the allowance


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Allowance for Doubtful Accounts and Bad Debt Expense - July 2016 (1)

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