The main purpose of a business entity is to earn a profit, and the international accounting standards require every business entity to report its financial gains and losses. Most small businesses are relying on the operating cash inflow for their day-to-day operations. Therefore, more sales mean more cash inflow. But it is also true that …
Direct write-off method: The direct write-off method is one of the two commonly known methods of treating bad debt expense. Through the direct write-off method, we straightforwardly book a bad debt expense by debiting the bad debt expense account and crediting the accounts receivable account. Hence, the sales amount remains intact, account receivables are eliminated …
Overview: Any company that has a policy of selling goods on credit has to deal with the problem of bad debts. Bad debts are uncollectible invoices that are written-off from the accounts receivable after all attempts of recovery have been made. This loss of revenue is referred to as a bad debt expense. As per …
Bad Debt Provision: Overview, Calculate, And Journal Entries Read More »
Introduction: When credit sales are made, the customer owes you money against the sale of goods you made or the services you rendered. A company then has to write off some invoices that are uncollectible at some point in the future. An invoice or account receivable that can’t be recovered at all even after several …
Advantages and Disadvantages of the Allowance Method Read More »
Bad debt expense: A bad debt expense is a loss that the company incurs related to the accounts receivable. It is an invoice that is uncollectible since the customer is unable to pay or not willing to pay back the amount for some reason and all attempts of recovery have been made by the company. …
Advantages and Disadvantages of Direct Write-off Method: Detail Explanation Read More »
Accounts receivable: Accounts receivable of a company represent the amount that customers owe to the company in respect of the purchase of goods or services on credit. Sales on credit means that the revenue has been earned and recognized in the financial statements in the accounting period, but the payment for it will be received …
Accounting for Direct Write-off Method (Explanation With Examples) Read More »
Overview: Provision for bad debt is the current assets account in the balance sheet that uses to records the provision for bad debt that the entity provides to account receivables that collection likelihood is high. This account is similar to accumulate depreciation that use to records the accumulation of depreciation to show the carrying value …
What is the difference between accounts receivable and provision for bad debt? Read More »
Accrued revenues and accounts receivable are the current assets that are reported in the balance sheet of the company. Accrued revenues, sometimes called contract assets are the revenues that a company accrued on the basis that they expected to receive from the goods or services that they already provided, but not yet billed. Account receivable …
What is the Difference Between Accounts Receivable and Accrued Revenues? Read More »
Definition: Days Sales Outstanding basically refer to the average number of days that the entity takes to collect its credit sales over a period of time. The company measures this ratio in order to manage the efficiency and effectiveness of credit policy as well as receivable collection procedure. If the ratio is high that means …
Overview: Account receivables are the amount owes by other entities or people as the result of purchasing goods or rendering services without making payments at the time goods or services are delivered. This happens when the entity sells its goods or services to the customer. In daily business activities, the customers would love to purchase …
What are Accounts Receivable? (Overview, Example, Recognition, And Important) Read More »
