bad debts doubtful accounts

Journal entries

Adjusting entries is also what

Accounting framework

standard ng ipapakita mo sa what company na aaplayan mo mga financial statement na need idetermin pata ipakita sa klase ng company na papakitaan mo

US GAAP

rule based

IFRS

principle based (broad) Adapted in Ph

Accrual Principle

revenue is recorder regardless of payment, expense is recorded if service is received even if not paid yet

Bad debt, depreciation, accrued income, accrued expense, deferred income, prepaid expense, merchandise inventory

adjusting items

Bad debts, Depreciation, Accrual expense, Prepaid expense, Accrual Income, Deferred Income

BDA PAD

allowance method

determined by percent/ prescribe to use

Direct write off method

bankrupcy/ prescribe not to use

no journal entries

DW: when account is doubtful to be collected

debit: accounts receivable credit: bad debt expense debit: cash credit: accounts receivable

DW: when account previously written off was recovered

Debit: Bad debts expense Credit: Accounts receivable

DW: when account is proven or certain to be worthless

debit: bad debts expense credit: allowance for bad debts

AM: When account is doubtful to be collected

Debit: allowance for bad debts Credit: account receivable

AM: when account is proven or Certain to be worthless

Debit: accounts receivable credit: allowance for bad debts debit: cash credit: accounts receivable

AM: When account previously written off was recovered

Account receivable minus allowance for bad debts

how to get net realization value of account receivable

jan, feb, march, apr, may, jun, jul, aug, sep, oct, nov, dec

calendar months

cost- salvage value/ useful life in years

depreciation per year formula using straight line method

Cost -accumulated depriciation

Book value formula

220

if 2020 acc depreciation is 110 in 2021 how much is it in book value

Principal x rate x time

Interest formula

debit: depreciation expense credit: accumulated depreciation

pro-forma entry to record depreciation

no

Can land depreciate?

Cash x % x month / 360

Accrued Interest formula

Debit Expense credit prepaid expense

prepaid expense: asset method pro forma adjusting entry

Debit: prepaid expense credit: expense

prepaid expense: expense method pro forma adjusting entry

Debit: deferred income Credit: income

Deferred income: liability method, Pro-forma adjusting entry

Debit: income Credit: deferred income

Deferred income: income method, Pro-forma adjusting entry

Allowance for bad debts

Contra asset account

Wear and Tear, Elements of nature, Accidents, Obsolescence, Inadequacy

Causes of Depreciation

Wear and Tear, Elements of nature, Accidents

Depreciation is due to physical condition

Obsolescence, Inadequacy

Depreciation is due to functional conditional

Cost, Useful life, Salvage value

Factors of Depreciation

Expense is understated, Net income is overstated

If depreciation is not made

Accrued Income

It is income already earned, but not yet receive and so classified as an asset

Accrued Expense

It is expense already incurred, but not yet paid and so classified as liability

Debit: Accrued Income Credit: Income

Pro-forma entry to accrued income

Credit: Expense Debit: Accrued Expense

Pro-forma entry to accrued expense

Asset, Revenue, Net income, Equity is understated Liability and expense is not affected

If Accrued Income is not recorded

Liability and expense is understated Net Income and equity is overstated, asset and revenue is not affected

Failure to record accrued expense

Deferred Income

It is income already received, but not yet earned and so classified as liability

Prepaid Expense

It is expense already paid, but not yet incurred and so classified as asset

Debit: Expense Credit: Prepaid Expense

Prepaid Expense: Asset Method, Pro-forma adjusting entry

Debit: Prepaid Expense Credit: Expense

Prepaid Expense: Expense Method, Pro-forma adjusting entry

Cash basis approach

Expense is recognize when paid regardless of when inccured