18 Questions
When is the entry made for bad debt loss?
During the accounting period or at the end of the period
What is the effect on Accounts Receivable in the Balance Sheet?
Decrease in Accounts Receivable
What is the journal entry to write off a bad debt?
Debit Accounts Receivable, Credit Allowance for Doubtful Accounts
What happens when a bad debt is recovered?
Retained earnings increases on the balance sheet
What is the purpose of the Allowance for Doubtful Accounts?
To estimate uncollectible accounts
How is bad debt recovered shown in the financial statements?
As a separate item of revenue on the income statement
What does it mean when an account receivable is recovered after being written off?
It is evidence that the initial write-off was an error and the asset should be reinstated.
What is the correct journal entry to reverse a written-off account receivable?
Debit AUA; Credit A/R, XYZ
How would you record the death loss of a cow worth PhP 10,000?
Debit Death Loss; Credit Dairy Herd Inventory
What is the correct accounting treatment for an in-kind donation worth PhP 10,000?
Debit Fertilizer Supply; Credit Income from Grants/In-kind Donations
What type of unusual loss is the death of a cow worth PhP 10,000?
Death Loss
What is the purpose of accounting for in-kind donations?
To recognize the donations received from donors.
What happens when goods or services are sold on credit?
Some of the accounts receivable may be uncollectible
What is the purpose of the direct write-off method?
To eliminate uncollectible accounts from the records
What is the accounting entry for writing off a bad debt using the direct write-off method?
Debit Bad Debt Expense, Credit Accounts Receivable
Why is the allowance method used in accounting for bad debts?
To estimate the amount of uncollectible accounts
What is a risk management strategy in accounting for bad debts?
Estimating the allowance for bad debts
What is a compliance requirement in accounting for bad debts?
Recognizing bad debt expenses in financial reporting
Test your understanding of accounting principles by identifying the correct transaction and journal entries for bad debt. Learn how to recognize and record bad debt in the balance sheet.
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