Accounting - Unit 5 - Part 2 - Allowance for Doubtful Accounts - Income Statement Method

Copy of problems presented in series:

In this video series we discuss accounts receivable and the challenges of accounting for their uncollectibility. We learn about bad debt expense, and setting up allowances using the income statement method and balance sheet method. Finally we learn how to write off accounts receivable.

This video and the attached worksheet were prepared by Tony Bell of Thompson Rivers University (TRU) - I encourage educators to freely use, edit and modify these videos and the attached worksheet - they are available under Creative Commons Licenses.

[Tony-Bell]

I'm sure it will be harder, but if you understand the concepts from these videos well, you will kick butt in your classes. The fact that you are learning this before going to UNI puts you way way way ahead of the game.

[Tony-Bell]

Thanks so much :) Youtube is a great place for educational videos! Good luck in your classes~!

[Ricco]

I just wanna say that you are the best Prof Tony. In my point of view I see you better than my prof and TA's. I really appreciate what you have done. All your videos are helpful and useful. I should thank you from my deep heart. May god stands in your way and make it easier as you did for us.

[jeff-tgnb]

You are awesome ! Your material should be displayed as a resource by all the financial accounting teachers at TRU. It is not the case. I am telling you I think you are saving me to be destroyed by a nasty upcoming exam in BBUS2210.

[Tony-Bell]

Thanks for the question!

So, this problem assumes that the company has already properly recorded the credit sales (ie DR A/R, CR Sales Revenue) when the sale happened during the year.

All we need to do is to record the adjustment. So just to reiterate, the DR A/R has already happened.

Now you may wonder, well...A/R is only 77K, why not 850K? The reason is, that this company has already collected much of its A/R!

Hope this helps :)

[Tony-Bell]

This one is weirdly louder than most of the rest. I tried to turn it down on my end, but can't.

Then again, my voice is so beautiful (like an angel), that if your eardrums have to burst, there's not too many more pleasant ways to burst them than hearing my elegant voice.

[GoMassage]

Gotta tell you, This helped ENORMOUSLY!!! Awesome awesome awesome! Thank

[anthony]

You are amazing, u solve every problem i got on accounting, now i get on the habbit to search for answer on youtube =____=

[Tony-Bell]

Hey Gurpreet,

Watch part 3 of this series...it answers a very similar question.

Best of luck!

[pebre]

Very educational videos. thanks for taking time to make them

[Tony-Bell]

Thanks Jeff - good luck on the midterm!!

[dangelocarey]

Awesome explaination! Its perfectly clear now. Thanks!

[uabm]

Your vids are so logical and makes accounting seems easy :/. I'm wondering if it'll be this easy to follow when i take it in UNI.

[praveenkumarhatti]

Hi..Thanks for such amazing videos!
I have doubt in the video: You did not Dr the credit sales(850, 000) into Account Receivables but on the other hand you are considering the provision for doubtful debts for this 850, 000?

[pbandino]

Good video, Question?  I have $142, 000 Credit Sales and Balance for Allowance is a Debit $643 and the estimates that 2% of the credit sales will be uncollectible. So my journal entry will be

$142, 000 x 2% = $2, 840    ($2, 840 - $643) $2, 197

Deb  Bad Deb Exp $2, 197
   Cr  Allowance for uncollectible acct $2, 197

Right?

[samwisegambee]

For any UK viewers we call it Irrecoverable Debt. Great video Tony as always!! Any plans for more Advances Accounting in the future? 

[shivanmohyaddin]

Your just awesome teacher, best teacher the history ever known 

[mundabathindawale]

Hi, could you please explain how I can calculate the amount if the age of accounts & Estimated % collectible are given ?Credit terms are 2/10, n/30. A/R balance $375, 600Number of Days Outstanding Estimated Percentage Collectible
0–30 2% 31-60 20% 61–90 40% Over 90 50%

[Jrector]

I have a question on 5:00. Why did you credit Allowance for doubtful accounts?

[atifasultani]

Cash 800
Accounts Receivable 10, 000
Allowance For Doubtful Accounts
200

Sales 120, 000
The accountant of the company estimate that the company will collect only 8, 000 of its receivables.
could you plz explain this one.