ACCOUNTING FOR RECEIVABLES Accounts Receivable A. An amount due from customers for sales B. A separate account is maintained for C. Direct Company Sales 1. DR. customer D. Credit Card Sales 1. a. DR. 2. If credit card receipts are deposited as cash DR. If the business must wait for payment: CR a At time of sale, DR DR CTR b. When payment is received, DR. CR. E. Valuing Accounts Receivable 1. 3. Uncollectible accounts or bad debts for customers who do not pay a. records loss from uncollectible A/R at the time it is determined to be uncollectible b. Entry to write off; DR. C a. CR. Does not match expense to same period as revenue reported at the end of each period, bad debt expense is estimated and recorded b. better matches expense to same period as revenue generated C. A/R reported on B/S at net realizable value d Entry to estimate: DR. e. Entry to write off: DR. 4. Recovery of a Bad Debt a b. CR. CR First reverse the original write off entry and reinstate account Second record collection of account F. Estimating Bad Debts Expense 1. a. Income statement approach b. Calculated as a percent of credit sales 2. a. b. C d Balance sheet approach Calculates desired credit balance in Allowance for Doubtful Accounts - multiplies a percentage by outstanding receivables to get the amount of uncollectible accounts -examines each accounts receivable classified by how long they are past due and multiplied by a percentage