Anyone here know accounting?

[Majingir]

I have an assignment due, but main problem is that I can't find a question similar to it in my notes/textbook or any previous homework question I've done.

If anyone here is good at accounting(or at least know how to do ADA(allowance for doubtful accounts) stuff,let me know)

[Redacted01]

Is it an asset or liability... you'd think I'd learn something from all the times talking to my dad about his job, but nope.

[ImTellinTim]

What's the question?

[FinsUp75]

The allowance is an expense, which reduces an asset. At least that's how we account for it here in my job.

[ImTellinTim]

Allowance for Doubtful Accounts should be a contra asset account that sits on the balance sheet and reduces the asset. It is part of the Net Receivables calculation.

To expense it, you do a periodic analysis of your receivables and adjust the Allowance for Doubtful Accounts according to a percentage of your receivables based on an aging schedule. The other side of the entry is Bad Debt Expense.

E.g.:

You have $100,000 of receivables at December 31, 2012, and your aging schedule says $1,000 was uncollectable at that time. On January 31, you run your aging schedule again and find you have $110,000 in AR and that $1,500 is uncollectable.

The entry is:
Bad Debt Expense $500 (Debit)
Allowance for Doutbful Accounts $500 (Credit)
(January Adjustment for Doubtful Accounts)

Your balance sheet would say:

Accounts Receivable $110,000
Allowance for DA $(1,500)
Net Receivables $108,500

And the income statement would have a $500 Bad Debt Expense for the month.

[cjonesfan921]

Quote: Originally Posted by ImTellinTim

Allowance for Doubtful Accounts should be a contra asset account that sits on the balance sheet and reduces the asset. It is part of the Net Receivables calculation. To expense it, you do a periodic analysis of your receivables and adjust the Allowance for Doubtful Accounts according to a percentage of your receivables based on an aging schedule. The other side of the entry is Bad Debt Expense. E.g.: You have $100,000 of receivables at December 31, 2012, and your aging schedule says $1,000 was uncollectable at that time. On January 31, you run your aging schedule again and find you have $110,000 in AR and that $1,500 is uncollectable. The entry is: Bad Debt Expense $500 (Debit) Allowance for Doutbful Accounts $500 (Credit) (January Adjustment for Doubtful Accounts) Your balance sheet would say: Accounts Receivable $110,000 Allowance for DA $(1,500) Net Receivables $108,500 And the income statement would have a $500 Bad Debt Expense for the month.

/ Thread.

[Fresh Tendrils]

League of Accountants strikes again!

[philliesfan980]

As a CPA, I endorse this thread.