Accounting - Unit 5 - Part 3 - Allowance for Doubtful Accounts - Balance Sheet Method

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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.

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Hi,

You've definitely understood the issue. I don't have a great answer as to why.

When we are doing the aging of accounts receivable method, the amount we calculate in the ending balance of our allowance, which is why it goes on the bottom of the t-account. When we do % of sales, we are computing the Bad debt expense, which is why it goes into the middle of the t-account. So because we are computing 2 different things, we treat them in different ways.

Tony

Tony-Bell

You explained both methods fabulously! Much better than my graduate instructor. Thanks!

bettinawalker

Why is it that in the accounts receivable method, the 20% is listed as the ending balance as opposed to the % of sales method where it is directly plugged into the T-Account. Is that just a rule when you do the sales method, you plug it into the t-account whereas when you do A/R method you plug in the percentage as the ending credit balance?

uabm

ur teaching was awesome....how to find bad debt if allowance account already have a debit balance?

shahidsamad

Thank you Tony your video helped me refresh my knowledge after 15 years

parulparikh

If your Allowance for doubtful accounts has an outstanding debit number, would you add the debt number to the percentage of the accounts receivable for the journal entry?

melissabridges

i do want you to be my teacher, you are soooo good

oscarchong

I just want to say that your videos have helped me tremendously! Thanks so much for taking the time to make these!

hannahhayes

Seriously, these videos are amazingly helpful.

techanddancer

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