12 Accounting - December 3, 2015

Allowance for Doubtful Accounts is a contra-asset account. Contra-asset accounts are used to reduce the value of the related asset account. In this case, Allowance for Doubtful Accounts is used to reduce the value of Accounts Receivable, which is an asset account. It represents the estimated amount of accounts receivable that may not be collected. By deducting the allowance from the accounts receivable, the net realizable value of the asset is shown.

The journal entry "debit interest receivable, credit interest revenue" is made when the company accrues interest because it has a note receivable whose term crosses a fiscal period end. This means that the company has earned interest income from a note receivable that is not yet due for repayment. By recording this journal entry, the company recognizes the interest revenue as it becomes earned and increases the interest receivable account to reflect the amount owed by the debtor.

When a customer pays with their debit card, the store should debit the cash account. This is because the payment is made directly from the customer's bank account, and the store receives immediate access to the funds. By debiting the cash account, the store accurately reflects the increase in cash on their financial statements.

All of the items mentioned can be found on the balance sheet. Accounts Receivable represents the amount of money owed to a company by its customers for goods or services provided. Allowance for Doubtful Accounts is a contra-asset account that represents the estimated amount of accounts receivable that may not be collected. Net Accounts Receivable is the difference between Accounts Receivable and the Allowance for Doubtful Accounts, representing the amount expected to be collected. Therefore, all three items are important components of a company's balance sheet.

This journal entry is the transaction to write off a customer's account because it decreases the Accounts Receivable (credit) and increases the Allowance for Doubtful Accounts (debit). By debiting the Allowance for Doubtful Accounts, the company is recognizing that the customer's account is unlikely to be collected and is reducing the amount of Accounts Receivable accordingly.

The adjusting entry to estimate bad debts for the period is to debit Bad Debt Expense and credit Allowance for Doubtful Accounts. This entry recognizes the expense of estimated bad debts and reduces the value of the Allowance for Doubtful Accounts, which is a contra-asset account used to offset the Accounts Receivable. By debiting Bad Debt Expense, the company acknowledges that some of its accounts receivable may not be collectible and needs to be accounted for as an expense. By crediting Allowance for Doubtful Accounts, the company increases the allowance to cover potential bad debts.

At the end of the fiscal period, the account "bad debt expense" gets closed. This is because bad debt expense is an expense account that represents the estimated amount of accounts receivable that is unlikely to be collected. At the end of the fiscal period, all revenue and expense accounts are closed to prepare for the next accounting period. The allowance for doubtful accounts and accounts receivable are not closed at the end of the fiscal period as they are balance sheet accounts that carry forward to the next period.

Notes receivable are generally longer term compared to accounts receivable. This means that notes receivable have a longer repayment period than accounts receivable. Additionally, notes receivable are also interest-bearing, meaning that the borrower is required to pay interest on the amount borrowed. Therefore, both statements are correct.

When debiting Notes Receivable, you could credit any of the options mentioned: accounts receivable, cash, or sales. This is because Notes Receivable represents a promissory note or a written promise to receive payment from a customer. When you debit Notes Receivable, it means you are decreasing the amount owed to you by the customer. To balance the accounting equation, you need to credit an account, and any of the options mentioned can be used depending on the specific transaction and circumstances.

If the Allowance for Doubtful Accounts account has a debit balance before adjusting for bad debts, it means that the company has written off more accounts during the year than originally anticipated. A debit balance in the allowance account indicates that more bad debts have been recognized and written off, reducing the accounts receivable balance. This could be due to customers defaulting on their payments or being unable to fulfill their obligations, resulting in higher write-offs than expected.