Allowance for Doubtful Accounts

Allowance for Doubtful Accounts
07/06/2011 Comments Off on Allowance for Doubtful Accounts Academic Papers on Business Studies,Sample Academic Papers bernard
Debit Credit
Accounts Receivable 1,980,000 Balance b/f 1,800,000
Balance c/f 1,492,000 Bad Debts Expense 1,672,000
3,472,000 3,472,000
Balance b/f 1,492,000


The doubtful accounts expense for 2008 is $1,672,000 which is determined through the ledger for allowance for doubtful accounts after implementing 10% of ending balance of accounts receivable.


Georgia Company

Partial Balance Sheet

As on December 31, 2008

Accounts Receivable                                                              14,920,000

Less: Allowance for doubtful accounts                                  (1,492,000)



The matching principle in accounting entails that a company records all expenses related to revenues in the same period. Generally Accepted Accounting Principles – GAAP does not allow companies to record bad debts on a later stage when they are actually estimated to be uncollectible as the amount of accounts receivable and net income of the pervious period in which actual sales were made would be overstated. In order to meet this requirement, companies’ record doubtful debt in the same period when sales are made based on an estimate of prior periods (Nikolai, Bazley, & Jones, 2009).

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