# 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

## 3. Analyzing transactions - accrual basis businesses

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

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

3.1.2. Allowance method (balance sheet approach)

3.1.2.1. 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

### 3.2. Writing off an account determined to be uncollectible

3.2.1. Debit Allowance for Doubtful Accounts

3.2.2. Credit Accounts Receivable

## 4. Analyzing transactions - cash basis businesses

### 4.1. Reinstating an account that was previously written off

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

4.1.2. 2. Debit Cash, Credit Accounts Receivable

## 5. Summarizing transactions

### 5.1. Balance sheet presentation

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

### 5.2. Income Statement presentation

5.2.1. Net Credit Sales - Bad Debt Expense

## 9. Recording transactions

### 9.1. Regular transactions

9.1.1. Sales on account (increase)

9.1.1.1. Debit Accounts Receivable

9.1.1.2. Credit Sales Revenue

9.1.2. Payments on account (decrease)

9.1.2.1. Debit Cash

9.1.2.2. Credit Accounts Receivable

### 9.2. Adjustments needed at year end

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

9.2.1.2. Credit Allowance for Doubtful Accounts

## 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