Accounting Demystified phần 4 pptx

Accounts Receivable 45

FIGURE 7-2

Accounts receivable

ABC 1,000.00 500.00 ABC

DEF 2,000.00 2,000.00 DEF

GHI 4,500.00 4,500.00 GHI

ABC 2,000.00 500.00 ABC

DEF 2,000.00 2,000.00 DEF

GHI 6,500.00 5,000.00 GHI

ABC 3,000.00 1,000.00 ABC

DEF 2,000.00 1,000.00 DEF

GHI 3,500.00 5,000.00 GHI

ABC 2,000.00 4,000.00 ABC

DEF 1,500.00

GHI 2,400.00

DEF 3,000.00

9,900.00

years) of activity and many customers. The subsidiary ledger/

control account system is the easiest way to track receivables.

Bad Debts

What happens if a customer isn’t going to pay? Suppose the

customer goes bankrupt, or the account is three years old.

There is no sense maintaining the balance, sending state￾ments, and perhaps following up with telephone calls. Sooner

or later the company has to realize that it is not going to get

paid and remove the amount from Accounts receivable. There

are two methods that can be used: the direct write-off method

and the allowance method.

Direct Write-Off Method

The direct write-off method removes (writes off) a balance

from the Accounts receivable account when the company de-

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