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Learning Objectives © 2015 Cengage Learning. All Rights Reserved. Learning Objectives © 2015 Cengage Learning. All Rights Reserved.

Learning Objectives © 2015 Cengage Learning. All Rights Reserved. - PowerPoint Presentation

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Learning Objectives © 2015 Cengage Learning. All Rights Reserved. - PPT Presentation

LO 1 Calculate and record uncollectible accounts expense using the direct writeoff method LESSON 61 Direct WriteOff Method of Recording Uncollectible Accounts Direct WriteOff of Losses from Uncollectible Accounts ID: 652897

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Slide1

Learning Objectives

© 2015 Cengage Learning. All Rights Reserved.

LO

1 Calculate and record uncollectible accounts expense using the direct write-off method.

LESSON

6-1

Direct Write-Off

Method of Recording

Uncollectible AccountsSlide2

Direct Write-Off of Losses from Uncollectible Accounts

Accounts receivable that cannot be collected are called

uncollectible accounts. Uncollectible accounts are sometimes referred to as bad debts.Canceling the balance of a customer account because the customer does not pay is called writing off the account.Recording uncollectible accounts expense only when an amount is actually known to be uncollectible is called the

direct write-off method.SLIDE 2

LO1

Lesson 6-1

© 2015 Cengage Learning. All Rights Reserved.Slide3

Recording Uncollectible Accounts Expense

SLIDE 3

LO1

Lesson 6-1

© 2015 Cengage Learning. All Rights Reserved.

November 4. Wrote off Plaza Electronics’ account

as uncollectible, $182.00. Memorandum No. 62.Slide4

Collecting a Written-Off Account—Direct Write-Off Method

SLIDE 4

1. Record an entry in the general journal to debit Accounts

Receivable/Plaza Electronics and credit Uncollectible Accounts Expense for the amount of the receipt, $182.00.

LO1

Lesson 6-1

2. Record an entry in the cash receipts journal to debit Cash and credit Accounts Receivable for the amount of the receipt, $182.00.

1

© 2015 Cengage Learning. All Rights Reserved.

Reopen the Account

2

Record the Cash ReceiptSlide5

Lesson 6-1

Audit Your Understanding

1. Why should the amount of an uncollectible account be removed from the assets of a business?SLIDE

5

ANSWER

When a customer’s account is believed to be uncollectible

, it should be written off because it is no longer an asset of the business.Lesson 6-1© 2015 Cengage Learning. All Rights Reserved.Slide6

Lesson 6-1

Audit Your Understanding

2. In the direct write-off method, how is an uncollectible account closed?SLIDE

6

ANSWER

Uncollectible Accounts Expense is debited;

Accounts Receivable is credited. The customer’s account in the accounts receivable ledger is also credited. Lesson 6-1

© 2015 Cengage Learning. All Rights Reserved.Slide7

Lesson 6-1

Audit Your Understanding

3. Why is the customer account reopened when cash is received for an account previously written off as uncollectible?

SLIDE 7

ANSWER

The account is reopened to provide a complete

history of the customer’s credit activities.Lesson 6-1© 2015 Cengage Learning. All Rights Reserved.