Accounting for Bad Debts (Allowance Method)

[@aewcontrol2984]

The best explanation on KZbin, NOW I understand. Thanks!! it's been about an entire day of trying to understand this part.

[@ethangarrett4175]

Explained this much better than my textbook could, Thank you!

[@makeittrades5750]

Finally a honest video showing how the financial statements are impacted and the trade-off which is inevitable - this gets so overlooked. Thanks!

[@raccoon874]

*this is by far the most detailed and best structured explanation, thank you*

[@breakingmuse-bleedslow9251]

Wow you speak just the right words and explain with reference to where what will appear on financial statements, thank you ❤

[@MYTHOMINHTRAN]

Crystal clear for students! Appreciate very much, Sir!

[@shahimpanjwani8547]

great video thank you please do stuff like this often you're really good at it!

[@gabrielsocas8377]

This video was great , I was so confused on how it effects the financial statements, thank you !

[@autocanuckduck7503]

Excellent video, thanks! I really liked the explanation of the timing at 7:41

[@marisol033]

How long have you been teaching? You are good at it. Thank you soo much. Most professors do not go into the simple way of explaining it.

[@jqkvx]

THANK YOU SO MUCH THIS WAS SO CLEAR AND WELL EXPLAINED

[@rainesilk9791]

Excellent explanation! Thank you so much!

[@rahulkumarsitap1536]

I have a question about the bad debt expense that we have created for 1000. if the amount of 50 is already collected, why there is no impact to bad debts expense since this is no more expense to us as we have already collected that amount. please explain.

[@TheAccountingProf]

Hi there! The bad debt estimate of $1,000 is based on the entire $10,000 A/R balance. The implication is that, of that balance, $9,000 will be collected and $1,000 won’t. The $50 that gets recovered counts toward the $9,000 you expected to be collected. Meanwhile, as long as at least $1,000 of the A/R remains outstanding (unpaid), there is still the possibility that original $1,000 estimated bad debt will come true, which is why we don’t reverse it. (Note: In the next period, the bad debt allowance will get adjusted again based on the new A/R balance, and it is possible at that point that some bad debt expense will get reversed).

[@rahulkumarsitap1536]

@@TheAccountingProf.. okay.. thank you very much for the response. about the note you mentioned at the end of the response.. do you mean.... if the $ 1000 we estimated in previous period.. by any change if that gets collected(or part of it.. lets says $400) in next period... we should reverse the balance from bad debts expense for $ 400 right?

[@TheAccountingProf]

@@rahulkumarsitap1536 That’s the idea, though it wouldn’t be that exact in practice. You are going to make new A/R sales, make new collections, etc. during the next period, so the new A/R balance, including old and new amounts, will be evaluated as one at the end of the next period, and the Allowance adjusted accordingly.

[@rahulkumarsitap1536]

@@TheAccountingProf okay great... thanks for clarification... very much appreciated

[@flormoreno3746]

Thank you sir, you are much better than all of my teachers haha

[@Spaceman019]

thank you so much ....my teacher made this look so hard

[@shine2678]

Thanks a lot sir! this was very helpful, God bless you and ur fam♥

[@Anton-rc6pt]

best acct video i hv! save my life fr ❤

[@timadams129]

Thank you for the video. This helped me so much! Please do more videos.

[@DreamFirms]

Learned a lot!

[@apshoraibnat9891]

Best video

[@andyvazx]

Very helpful

[@lauriewalton5305]

How can I print this out? I am creating a workbook for my board members to enlighten them on this process

[@YoucefYoucef-ft9ce]

Thank you sir

[@claudia644]

Thank you, I need it this for my Accounting 2 class, so what hapens if reconciliation was done. What hapens wen reversing A/R, Allowance?

[@IamKetura]

Wow comments didnt lie thank youuu

[@Frncsmrn]

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[@jyotisingh-wh1uo]

Just tell me that bad debts to allowance for Doubtful debt entries will affect profit and loss account?

[@TheAccountingProf]

Any time the Bad Debt Expense account is debited, an expense will hit the Income Statement, and therefore profit.

[@blackninja6416]

Still does not make sense The accounts receivable has now been collected so there must be no balance from allowance instead there is. For example: Recording Estimate of Bad Debts: Bad Debts Expense: 10k Allowance... 10k Writting of: Allowance... 10k A/R. 10K Recovery: A/R. 10k Allowance... 10k Cash. 10k A/R. 10k The accounts receivable has now 0 balance but there is still allowance for doubtful accounts

[@TheAccountingProf]

Allowances are recorded as adjusting journal entries at each period end. In your example, the entire A/R balance has been collected by period end, so the remaining allowance would then be reversed since it is no longer needed: Dr Allowance, Cr Bad Debt Expense.

[@blackninja6416]

@TheAccountingProf Thank you Prof

[@breakingmuse-bleedslow9251]

Wow you speak just the right words and explain with reference to where what will appear on financial statements, thank you ❤