Net Accounts Receivable: Allowance for Doubtful Accounts definitions Flashcards
Net Accounts Receivable: Allowance for Doubtful Accounts definitions
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Accounts Receivable Amounts owed by customers for credit sales, recorded as a debit balance and paired with a contra asset to reflect expected uncollectible amounts. Allowance for Doubtful Accounts Contra asset account with a credit balance, used to estimate and offset potential losses from uncollectible receivables. Bad Debt Expense Estimated loss from credit sales that are not expected to be collected, recorded to match expenses with related revenues. Matching Principle Accounting guideline requiring expenses to be recorded in the same period as the revenues they help generate. Contra Asset Account with a balance opposite to its related asset, used to reduce the asset's net value on the balance sheet. Credit Sales Sales transactions where payment is deferred, creating accounts receivable for the seller. Direct Write-Off Method Non-GAAP approach where uncollectible accounts are recognized only when deemed uncollectible, ignoring the matching principle. Percentage of Sales Method Estimation technique where bad debt expense is calculated as a set percentage of total credit sales for the period. Aging of Receivables Method Estimation approach analyzing receivables by age to determine the required ending balance in the allowance account. Net Accounts Receivable Amount expected to be collected from customers, calculated as accounts receivable minus the allowance for doubtful accounts. Uncollectible Accounts Receivables deemed unlikely to be collected, typically written off against the allowance for doubtful accounts. Revenue Income generated from normal business operations, often recognized at the point of credit sales. Debit Balance Normal balance for asset accounts, indicating the amount owed to the company. Credit Balance Normal balance for contra asset and liability accounts, used to offset related debit balances. Write-Off Accounting action removing uncollectible receivables from the books by reducing both the allowance and accounts receivable.
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