Chapter 11: Bad Debts and Accrued Adjustments

BAD DEBTS

uncollectible amounts owed by customers

BAD DEBTS EXPENSE

the loss due to uncollectible accounts

INCOME STATEMENT METHOD OF ESTIMATING BAD DEBTS

uses a percentage (%) of net sales as a basis for estimating bad debts expense

BALANCE SHEET METHOD OF ESTIMATING BAD DEBTS

uses a percentage (%) of accounts reecivable as a basis for estimating bad debts expense

ACCOUNT RECEIVABLE AGE ANALYSIS

a list of balances owed by each customer and how long the balance has been owed

ACCRUED EXPENSES

expenses that have been incurred but not yet recorded in the books

ACCRUED SALARIES

salaries earned but not yet paid

ACCRUED REVENUE

revenue earned during the fiscal period but not yet recorded in the books

UNEARNED REVENUE

*current liability account*; revenue that has been received but is not yet earned

CLASSIFIED INCOME STATEMENT

has three main sections: revenue, cost of goods sold, and operating expenses