Accounting Assignment: Bad Debts - Journal Entries and Analysis

This accounting assignment focuses on the calculation and recording of bad debts. It includes journal entries for bad debt expense and the allowance for doubtful debts, using different methods such as a percentage of sales and aging of accounts receivable. The assignment provides detailed calculations of bad debts and discusses the perspective of an independent viewer of a trial balance, explaining how unadjusted debit balances relate to the provision for doubtful accounts. It further explores the evaluation of lifetime expected credit losses, the use of allowance methods, and the importance of considering current and future economic conditions, including industry and geographic factors. The assignment highlights the consistency of these approaches with IFRS 9, emphasizing the expected loss model.

Running Head: IMMEDIATE ACCOUNITNG VOLUME 1
IMMEDIATE ACCOUNITNG VOLUME

IMMEDIATE ACCOUNITNG VOLUME 2
Contents
A)................................................................................................................................................................3
1...................................................................................................................................................................3
2...................................................................................................................................................................3
3...................................................................................................................................................................4
4...................................................................................................................................................................4
B).................................................................................................................................................................4
C).................................................................................................................................................................5
References...................................................................................................................................................7

IMMEDIATE ACCOUNITNG VOLUME 3
A)
1
PART
A
Calculation of bad debts
Particulars Debit Credit
Accounts Receivable
$
1,05,000.00
Allowance for doubtful debts
$
1,950.00
Sales revenue
$
6,84,000.00
Sales returns and allowances
$
30,000.00
1 Journal Entry Debit Credit
Bad debts Dr.
$
6,150.00
To allowance for doubtful debts
$
6,150.00
for bad debts recorded
Allowance for doubtful debts Dr.
$
6,150.00
To Accounts receivables
$
6,150.00
for allowance for bad debts
adjusted
2
2 Journal Entry Debit Credit
Bad debts *( Working note ) Dr.
$
7,758.00
To allowance for doubtful debts
$
7,758.00
for bad-debts recorded

IMMEDIATE ACCOUNITNG VOLUME 4
Calculation of bad-debts Gross Percentage Amount
0-30 days outstanding $ 36,000.00 1% $ 360.00
31-60 days $ 48,000.00 5% $ 2,400.00
61-90 days $ 12,200.00 12% $ 1,464.00
over 90 days $ 8,800.00 18% $ 1,584.00
Total $ 5,808.00
3
Journal Entry Debit Credit
Bad-debts *( Working note ) Dr.
$
2,250.00
To allowance for doubtful debts $ 2,250.00
for bad-debts recorded
4
Journal Entry Debit Credit
Bad-debts *( Working note ) Dr.
$
3,858.00
To allowance for doubtful debts $ 3,858.00
for bad-debts recorded
Calculation of bad-debts Gross Percentage Amount
0-30 days outstanding $ 36,000.00 1% $ 360.00
31-60 days $ 48,000.00 5% $ 2,400.00
61-90 days $ 12,200.00 12% $ 1,464.00
over 90 days $ 8,800.00 18% $ 1,584.00
Total $ 5,808.00

IMMEDIATE ACCOUNITNG VOLUME 5
B)
From the perspective of an independent viewer of Chole's trial balance, the unadjusted
debit balance at the end of the year depicts the amount of the provision left after the amount of
the bad debts has been deducted. An unadjusted charge balance in recompense for far-fetched
accounts at year end is an outcome, when all is said in done, of discounts during the year
exceeding the aggregate of starting credit balance in remittance for doubtful records, in addition
to the momentum year awful obligation expense accrual. As a free analyst of Chloe's financial
statements, we can take note of that an awful obligation cost collection in the current year is
expected to guarantee there is an adequate credit balance in the stipend for far-fetched accounts
toward the finish of the year (Kuznetsova, O. N. (2019).
C)
At the point when an element evaluates lifetime expected credit misfortunes, it should
look at all conceivable default occasions over the life of the accounts receivable. It would utilize
data accessible at the reporting date to assess a scope of potential results based on past occasions,
current conditions, and conjectures of future economic conditions and their likelihood of
happening. The remittance strategy inspects the organization of the receivables at the revealing
date. A level of-sales approach depends on chronicled awful obligation misfortunes just and may
not reflect the entirety of the normal credit misfortunes. On the off chance that a level of-sales
approach is utilized during the bookkeeping time frame, the allowance method ought to be
applied at the announcing date to further reexamine the make-up of the receivables around then.
Utilizing the percentage-of-offers approach would possibly be fitting if there is additionally an
appraisal of the year-end receivables to guarantee that the Allowance account is suitable
(Novotny-Farkas, 2016).

IMMEDIATE ACCOUNITNG VOLUME 6
An adjustment might be expected to the record with of setting debit or credit being made to Bad
Debt Expense. Chloe utilizes a remittance technique and the methodology utilized in 2 and 4 are
likely best, as the maturing data ought to provide more data to evaluate collectability. Chloe
would likewise want to guarantee that data on current and estimated conditions considering
factors like industry and geographic conditions are additionally evaluated in surveying the
receivables at the reporting date. This methodology would be progressively reliable with IFRS 9
(Brink, 2019). where impedance speaks to "expected credit misfortunes resulting from all
conceivable default occasions that is, increasingly steady with an expected misfortune model.

IMMEDIATE ACCOUNITNG VOLUME 7
References
Brink, J. (2019). Bad and doubtful debts. TAXtalk, 2019(76), 54-57.
Kuznetsova, O. N. (2019). Accounting and Control of Doubtful Debts Reserves. Finansovyj
žhurnal—Financial Journal, (4), 88-101.
Novotny-Farkas, Z. (2016). The interaction of the IFRS 9 expected loss approach with
supervisory rules and implications for financial stability. Accounting in Europe, 13(2),
197-227.