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Direct Write Off Method
- dr Bad Debt Expense
- cr Accounts Recievable
It over states the value of Accounts Recievable
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Allowance Method
- Record Sale
- dr Accounts Recievable
- cr Sales Rev.
- Estimate Of Bad Debts
- dr bad debt expense
- cr Allowance for doubtful accounts
- 1) Make end of period adjustment to record the estimated bad debits in the period credit sales occur.
- 2) Remove " write off " specific customer balances when they are to be uncollectible
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Recovery of an account previously written off
- dr Accounts Recievable
- cr Allowance for doubtful accounts
- " Reverse of write off "
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Write Off- Uncollectible Acount
- dr Allowance for doubtful accounts
- cr accounts recievable
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Allowance method for uncollectible accounts for Bad Debt Expense
- dr Bad Debt expense
- cr Allowance for doubtful accounts
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Allowance
It is a contra asset account. It is used when bad debt expanse is recorded prior to knowing the specific accounts receivable that will be uncollectible
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Percentage of credit sales method- estimating bad debt
Multiply the historical % of bad debt losses by the current periods credit sales
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Purchase Discounts
- dr Accounts Payable
- cr cash
- cr inventory
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Purchase Returns and Allowances
- dr Accounts Payable
- cr Inventory
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Lower Cost of Market Rule
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Perpetual inventory system journal entry if you are buying something
- dr Inventoy
- cr Accounts Payable
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Transportation cost journal entry- company's
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FOB Shipping point
Purchaser pays for the shipping
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FOB destination
Seller pays for the shipping
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When Cost are rising, what does FIFO produce?
Higher inventory value and a lower COGS
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When Cost are falling, what does FIFO produce?
A lower ending inventory and a higher COGS
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When faced with increasing cost per unit, a company will have a higher income tax expense when it use, LIFO, or FIFO?
FIFO
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Gross Profit
Net Sales- COGS
-
Gross Profit Percentage
- Gross Profit
- _________ times 100
Net Sales
-
B
A
S
E
- Beginning Inventory
- Add purchases
- Subtract COGS
- Ending Inventory
-
Weighted ave. cost
- Cost of good available for sales
- __________________________
Number of units available for sale
Smoothes out price changes
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LIFO
The goods that you purchased last are sold first
- May 6th $95} top sold
- May 5th $75}
- May 3rd $70) bottom still there, inventory on balance sheet
Better matches current costs in COGS with rev.
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FIFO
The goods that you purchased first are sold first
- May 6th $95) - Still there, inventory
- May 5th $75}
- May 3rd $70}- Both sold
Ending inventory approximates current replacement costs
-
Net Sales
Sales rev.- Sales returns and allowances- Sales Discount
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Sale of Merchandise in a perpetual system journal entry
- dr Accounts Recievable
- cr Sales Rev.
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Sales Returns and Allowances journal entry
- dr Sales returns and allowances
- cr Accounts Recievable
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Sales on account and Sales Discount
- dr Accounts Recievable
- cr Sales Rev.
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Discount journal entry
- dr Cash
- dr Sales discounts
- cr Accounts recievable
-
NSF check
Reduction in the book balance
-
EFT
- dr Cash
- cr Accounts Recievable
-
Interest Received from the bank journal entry
- dr Cash
- cr Interest Revenue
-
Customers check rejected as NSF
- dr Accounts Recievable
- cr Cash
-
Service Charges
- dr Office Expense
- cr Cash
-
Company Error
- dr Accounts Payable
- cr Cash
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Debt to Asset
The % of assets financed by debt. The higher the ratio the greater financing risk.
-
Asset Turnover
How well assets are used to generate revenue. Higher ratio means greater efficiency.
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Net Profit Margin
How much profit is earned by each dollar of revenue
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Additions bank side
Deposits in transit
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Deductions bank side
Outstanding checks
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Additions book side
Interest, EFT
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Deduction book side
NSF, company error, bank service charge
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When is ending inventory closest to the current cost?
FIFO
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