Accounts Receivable - sell goods/services on credit to customers and expect payment within 30 days

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Accounts Receivable - sell goods/services on credit to customers and expect payment within 30 days by Mind Map: Accounts Receivable - sell goods/services on credit to customers and expect payment within 30 days

1. Direct writeoff method for Bad Debt Expense

1.1. Debit Bad Debt Expense

1.2. Credit Accounts Receivable

2. Credit Interest Revenue

3. Debit Notes Receivable

4. Reinstating an account that was previously written off

4.1. 1. Debit Accounts Receivable, Credit Allowance for Doubtful Accounts

4.2. 2. Debit Cash, Credit Accounts Receivable

5. Classifying transactions

5.1. Asset

5.2. Debit to increase, credit to decrease

5.3. Goes on the balance sheet

5.4. Current asset

6. Recording transactions

6.1. Regular transactions

6.1.1. Sales on account (increase)

6.1.1.1. Debit Accounts Receivable

6.1.1.2. Credit Sales Revenue

6.1.2. Payments on account (decrease)

6.1.2.1. Debit Cash

6.1.2.2. Credit Accounts Receivable

6.2. Adjustments needed at year end

6.2.1. Bad Debt Expense - see Analyzing transactions tab for how to calculate

6.2.1.1. Debit Bad Debt Expense

6.2.1.2. Credit Allowance for Doubtful Accounts

7. Analyzing transactions - accrual basis businesses

7.1. Bad Debt Expense (year end adjustment)

7.1.1. 1. Percent of Sales Method (income statement approach)

7.1.1.1. Formula: Total credit sales x % uncollectible = Bad Debt Expense adjusting entry (see Recording transactions tab

7.1.2. Allowance method (balance sheet approach)

7.1.2.1. Formula: 1, Take each A/R balance x % uncollectible then add all balances together 2. Evaluate what current Allowance for Doubtful accounts balance is, then determine adjustment to get the balance to what you calculated in step 1

7.2. Writing off an account determined to be uncollectible

7.2.1. Debit Allowance for Doubtful Accounts

7.2.2. Credit Accounts Receivable

8. Analyzing transactions - cash basis businesses

8.1. Reinstating an account that was previously written off

8.1.1. 1. Debit Accounts Receivable, Credit Bad Debt Expense

8.1.2. 2. Debit Cash, Credit Accounts Receivable

9. Summarizing transactions

9.1. Balance sheet presentation

9.1.1. Net Realizable Accounts Receivable = Accounts Receivable - Allowance for Doubtful Accounts

9.2. Income Statement presentation

9.2.1. Net Credit Sales - Bad Debt Expense

10. Converting to Note Receivable if customer takes longer than 30 days to pay

10.1. Original note transaction

10.1.1. Credit Accounts Receivable

10.2. Adjustment needed at year end for interest revenue - Formula = Interest x Rate x Time

10.2.1. Debit Interest Receivable or Cash

10.2.2. Credit Interest Revenue

10.3. Payment of the note receivable at maturity

10.3.1. Debit Cash

10.3.2. Credit Notes Receivable