Question

Adidea Corp. estimates that $5,670 of its accounts receivables are uncollectible. How will the company record the transaction?

Answer 1

Answer:

When it is said that accounts receivables are uncollectible, it means that the company does not expect some of its accounts receivables to pay them back for the goods that the accounts receivables purchased on credit.

Uncollectible account receivables therefore reduce the accounts receivables account.

Entry will be:

Date              Accounts Description                                   Debit              Credit

xx-xx-xxxx     Noncollectible accounts expense             $5,670

                      Accounts Receivables                                                      $5,670

The uncollectibles are an expense and expenses are debited when they increase.

The accounts receivables are reducing and assets are credited when they reduce in value so it will be credited.