Objective 5: Direct Write-Off Method of Accounting for Uncollectibles
The allowance method emphasizes reporting uncollectible accounts expense in the period in which the related sales occur. This emphasis on matching expenses with related revenue is the preferred method of accounting for uncollectible receivables.
There are situations, however, where it is impossible to estimate, with reasonable accuracy, the uncollectibles at the end of the period. Also, if a business sells most of its goods or services on a cash basis, the amount of its expense from uncollentible accounts is usually small. In such cases, the amount of receivables is also likely to represent a small part of the current assets. Examples of such a business are a restaurant, an attorney’s office, and a small retail store such as a hardware store. In such cases, the direct write-off method of recording uncollectible expense may be used.
Under the direct write-off method,uncollectible accounts expense is not recorded until an account has been determinted to be worthless. Thus, an allowance account and an adjusting entry are not needed at the end of the period. The entry to write off an account that has been determined to be uncollectible is as follows:
May 10 Uncollectible Accounts Expense 420
Accounts Receivable—D.L.Ross 420
To write off uncollectible account.
What if a customer later pays on an account that has been written off? If this happens, the account should be reinstated. The account is reinstated by reversing the earlier write-off entry. For example, assume that the account written off in the May 10 entry is collected in November of the same fiscal year. The entry to reinstate the account is as follows:
Nov. 21 Accounts Receivable—D.L.Ross 420
Uncollectible Accounts Expense 420
To reinstated account written off earlier in the year.
Cash received in payment of the reinstated amount is recorded in the usual manner. That is, Cash is debited and Accounts Receivable is credited for $420.
强调报告呆帐费用在期间在相关销售发生的无法收集的方法。对匹配的费用的这重点与相关收支是占uncollectible 可接收更喜欢的方法。有情况, 然而, 它不可能估计, 以合理的准确性, 无法收集在期间的结尾的地方。并且, 如果事务卖大多它的物品或服务根据收付实现制, 相当数量它的费用从无法收集的帐户通常小。在这些情况下, 相当数量可接收是还可能代表当前的财产的一小部份。这样事务例子是一家餐馆、律师的办公室, 和一家小零售店譬如五金店。在这些情况下, 记录无法收集的费用直接注销方法也许被使用。在直接注销方法之下, 呆帐费用不被记录直到帐户被确定是不值得的。因而, 容限帐户和一个调整的词条不是需要的在期间的结尾。词条注销被确定无法收集的帐户是如下: 5月10 日呆帐费用420 认为应收D.L.Ross 420 注销呆帐。顾客以后若支付在被注销了的帐户? 如果这发生, 帐户应该被复原。帐户由扭转复原更加早期的注销词条。例如, 假设, 帐户被写在5月10 日词条被收集在同样财政年度的11月。词条复原帐户是如下: 11月21 日帐户应收D.L.Ross 的420 笔呆帐费用420 对被复原的帐户年初被注销。现金被接受在被复原的数额的付款被记录以通常方式。那是现金被扣除并且应收帐款相信为$420 。
