Page 63 - Demo

Ch(3) : Accounting for Receivable60Journal Entries are:DateExplanationDebitCreditJan,12020Bad Debts Expense500Account Receivable500Jan,152020Account Receivable300Bad Debts Expense(Recovery)300Jan,152020Cash300Account Receivable300Effect on the balance sheet:Ahmed CompanyBalance Sheet (Partial)At Jan 31 2020Current Assets:Cash6,900Account Receivable (5,200 %u2013200)5,000Inventory15,000Supplies2,100Total Current Assets29000Under this method, Bad Debt Expensewill only show actual losses from uncollectible. The company will report accountsreceivable at its gross amount. In Direct write off method, companies often record bad debt expense in a period different from the period in which they record revenue. The method does not attempt to match bad debt expense to sales revenues in the income statement.Nor does the direct write-off method show accounts receivable in the balance sheet at the amount the company actually expects to receive. Consequently, unless bad debt