A/R and Bad Debts Introduction
An introduction to Accounts Receivable and Bad Debts, and why we have to recognize bad debts.
The Direct Method of accounting for bad debts is not used very often, and is super easy. We won't spend too much time here.
The Allowance Method
The Allowance Method is where we spend most of our time when accounting for bad debts. Under the allowance method, we have two more methods: The Income Statement Method and the Balance Sheet Method. Here, we simply introduce the allowance method.
Income Statement vs Balance Sheet Methods
Under tha Allowance Method of accounting for bad debts, we have two ways of coming up with our estimates: The Income Statement method and the Balance Sheet method. In this video, I'll show you how to remember which is which.
Net Credit Sales
When you're using the Income Statement method, you calculate your Bad Debt Expense off of Net Credit Sales. Remember how to do Net Credit Sales?
Write Offs and Reinstatements
At some point, you'll have to write off an account, but it's ok, because you have an allowance for that sort of thing.
Notes Receivable seem a little out of place in this chapter, but they are pretty easy, so we'll tackle them quickly.
Interest Bearing Notes
When you borrow money, you don't get it for free. Here, we're going to calculate the interest on an interest bearing loan.
Non-interest Bearing Notes
"Non-interest bearing" is kind of a misnomer. You may not have to pay interest, but yo don't get all the cash up front, so it ends up being an interest expense anyway!
A contingent liability is based on something else. You may or may not have to pay this sort of liability.
|Click Here to View All Chapter 8 Problems at Once
|The Effect of Bad Debt Expense
|Calculating Bad Debts
|Contingent Liabilities - Warranties
|The Effect of Uncollectible Accounts
|Using the Balance Sheet Method