The uncollectible percentages and the accounts receivable breakdown are shown here. Lets say that the customer unexpectedly pays on the account in the future. What are the essential differences between these two methods? Discuss in your answer a possible reason for why the government wants to do this type of Multiple Choice For each of the individual categories, the accountant multiplies the uncollectible percentage by the accounts receivable total for that category to get the total balance of estimated accounts that will prove to be uncollectible for that category. The length of uncollectible time increases the percentage assigned. E. A company uses the percent of sales method to determine its bad debts expense. Nonbusiness Bad Debts - All other bad debts are nonbusiness. Bad Debt Expense increases (debit) as does Allowance for Doubtful Accounts (credit) for $58,097. The allowance for doubtful accounts is a contra asset account and is subtracted from Accounts Receivable to determine the Net Realizable Value of the Accounts Receivable account on the balance sheet. A. Assertion(s): Balance Sheet Effect: Income Statement Effect: Your first step in learning to audit is to understand and be able to identify management assertions for events and transactions. (d) entity. When a specific customer has been identified as an uncollectible account, the following journal entry would occur. Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits? Identify the accounting assumption principle or constraint that describes the situation above. The account balances, tolerable misstatement, and estima. A. To illustrate, lets continue to use Billies Watercraft Warehouse (BWW) as the example. 08 Oct 2019. Expense Recognition. 1. State the type of problems that could cause this cause. Discuss in your answer how differences in the The matching principle in accounting requires that accountants match expenses to their associated revenues. cent of Canadas economy. An objective of the expense recognition principle ("matching") is to have bad debt expense recorded in: Multiple Choice the same period that the related accounts receivable is determined to be uncollectible. When the estimation is recorded at the end of a period, the following entry occurs. As of January 1, 2018, GAAP requires a change in how health-care entities record bad debt expense. b. Ide, A typical substantive procedure followed for receivables is the confirmation of balances. D) $2009.21 Provide an explanation as to why accountants care how long it ta, Assumptions, principles, and cost constraint are used to describe the [{Blank}] based on the accounting conceptual framework. Nonbusiness bad debts must be totally worthless to be deductible. If a company wants to have its financial statements audited, it must use the expense recognition principle when recording business transactions. For example, a category might consist of accounts receivable that is 030 days past due and is assigned an uncollectible percentage of 6%. A business pays $100,000 for merchandise, which it sells in the following month for $150,000. Lets say this customer unexpectedly pays in full on May 1, 2019, the company would record the following journal entries (note that the companys fiscal year ends on June 30). The journal entry for the Bad Debt Expense increases (debit) the expenses balance, and the Allowance for Doubtful Accounts increases (credit) the balance in the Allowance. Identify the accounting assumption principle or constraint that describes the situation above. A sample shows that 663 of 884 registered voters from rural Minnesota voted in the 2012 presidential election, while 414 out of 575 registered voters from urban Minnesota voted. the period that a customer eventually becomes bankrupt. c. external users of accounting information. Analyze the impact of erroneous classifications in the operating activities section of the cash flow statement on free cash flow and how this distortion can impact the decisions made by financial statement users. debts: Bills, The future event is probable and the amount owed can be reasonably estimated, Contingent liabilities must be recorded if: A. d. At =.05\alpha=.05=.05, test the political analysts' hypothesis. What is the amount of net pay for the employee for the month of February? The expense recognition principle, as applies to bad debts, requires c) the use of the allowance method of accounting for bad debts. The expense recognition (matching) principle, as applied to bad debts, requires: a. that expenses be ignored if their effect on the financial statements is unimportant to users' business decisions. D) Debit Warranty Expense $5,000; Credit Warranty Liability $5,000 Looking at BWW, it has an accounts receivable balance of $324,850 at the end of the year. Please make sure to include the following in your response: Explain. You are considering switching to the balance sheet aging of receivables method. The expense recognition (matching) principle, as applied to bad debts, requires: Multiple Choice That bad debts not be written off. What is the amount of the employer's payroll taxes expenses for this employee? E) No Journal Entry, On November 1 Alan Company signed a 120-day, 8% notes payable with a face value of $9000. This site is using cookies under cookie policy . Next, determine the method that provides the most relevant information to financial statement users. Question 13 (5 points) Saved The expense recognition principle, as applied to bad debts: Question 13 options: Requires that expenses be ignored if their effect on the financial statements is unimportant to users' busine Favors the use of the direct write-off method for bad debts. a. A) Reward innovation in accounting. What is the likely source of these huge pools of savings? The expense recognition (matching) principle as applied to the bad debts requires the use of the allowance method of accounting for bad debts. are not subject to the Creative Commons license and may not be reproduced without the prior and express written This application probably violates the matching principle, but if the IRS did not have this policy, there would typically be a significant amount of manipulation on company tax returns. You currently use the income statement method to estimate bad debt at 4.5% of credit sales. In the example, income taxes will be underpaid in the current month, since expenses are too high, and overpaid in the following month, when expenses are too low. Which method do you think is more informative to financial statement readers? If there is a carryover balance, that must be considered before recording Bad Debt Expense. The entry to record the estimated warranty expense for the month is: That bad debts be disclosed in the financial statements. - incorrect financial data. c. underlying evidence upon which the audit opinion, Select the incorrect statement concerning responsibility reports. c. set the audit fee. Lets say that on April 8, it was determined that Customer Robert Crafts account was uncollectible in the amount of $5,000. D) $9720 B) Analyze the main reasons why unsecured creditors favor reorganizing an insolvent company rather than forc, When confirming accounting receivable, the auditor may use positive confirmations, negative confirmations, or a combination of both. For the month of January of the current year, he earned a total of $8288. Determine whether the following statement regarding management accounting's role in assigning decision-making authority is true or false: Since management accounting information is used for decision-making purposes, historical information is unnecessary. When future collection of receivables cannot be reasonably assumed, recognizing this potential nonpayment is required. It has an estimated useful life of 5 years. C. D. B) $420.00 Both unemployment taxes are applied to the first $7,000 of an employee's pay. A. to ensure the realization of receivables B. to determine revenue recognition policies C. to ensure customer satisfaction D. to minimize sales returns and allowances E. to prevent lappi, Improper revenue recognition is the most common form of fraudulent financial reporting and is the most prevalent reason for accounting restatements for all of the following reasons except: a. Bad Debts Expense is considered: a. an avoidable cost in doing business on a credit basis. This journal entry takes into account a debit balance of $20,000 and adds the prior periods balance to the estimated balance of $58,097 in the current period. Select all that apply. Recent Diabetes As the following table shows, projections indicate that the percent of U.S. adults with diabetes could dramatically increase. b. Continuing our examination of the balance sheet method, assume that BWWs end-of-year accounts receivable balance totaled $324,850. Accounts receivable decreases because there is an assumption that no debt will be collected on the identified customers account. Requires that bad debts be disclosed in the financial (b) Use the model to predict the percent of U.S. adults with diabetes in 201820182018. The use of the direct write-off method for bad debts The use of the allowance method of accounting for bad debts That bad debts be disclosed in the It may be obvious intuitively, but, by definition, a cash sale cannot become a bad debt, assuming that the cash payment did not entail counterfeit currency. Provide support for your rationale. The FUTA tax rate is .6% and the SUTA tax rate is 5.4%. Experience shows that warranty expenses average about 5% of the selling price. The expense recognition principle, a component of the matching principle, dictates that expenses be recognized in the same accounting period as the revenue it is associated with. C. helps users to make better decisions. E.g. debts. benevolence C. . The entity principle b. Your discussion may include accounting estimates, accounting methods, real activities, or classification decisions. 23. then you must include on every digital page view the following attribution: Use the information below to generate a citation. a. All liabilities have been included and none have been left out. The reports should be stated in simple terms. The amount of Federal Income Tax withheld from his earning was $1,375.17. What is your investing plan for choosing bank services in the future? 1. financial statements is unimportant to users' business This is an example of the application of the: A. consistency principle B. materiality concept C. disclosure principle D. accounting conservatism, Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for: a. taxing authorities. Earned revenues Accounting department matches invoices to receiving reports or special authorizations before payment. Check of a customer returned by bank to company because of insufficient funds,$1,750. The use of the direct write-off method for bad debts. Current liabilities The estimation is made from past experience and industry standards. Estimating the Bad Debt Expense In the first year, 15,000 bolts were produced. FICA tax for Social Security is 6.2% on the first $128,400 of earnings each calendar year and the FICA tax for Medicare is 1.45% of all earnings. estimates (April 2021) by RBC Bank suggest that households in Canada have $220 billion of cash Creative Commons Attribution-NonCommercial-ShareAlike License The use of the direct write-off method for bad debts C. The use of the allowance method of accounting for bad debts D. Prepare the journal entry for the balance sheet method bad debt estimation. Therefore, the adjusting journal entry would be as follows. Compute bad debt estimation using the balance sheet method of percentage of receivables, where the percentage uncollectible is 9%. GAAP says we should use direct, but the easier one to use is the indirect. a) Is incorrect as expenses should not be ignored, even if they are small. For example, when companies account for bad debt expenses in their financial statements, they will use an accrual-based method; however, they are required to use the direct write-off method on their income tax returns. What accounts will you pick, and why, and how do they make you money? Adequate documentation c. Physical safeguards d. Independent check e. Separatio, The basic purpose of an accounting system is to: A) Develop financial statements in conformity with generally accepted accounting principles. Outline, 1. This reinstatement requires Accounts Receivable: Customer to increase (debit), and Allowance for Doubtful Accounts to increase (credit). Identify the accounting assumption principle or constraint that describes the situation above. Marlow Company purchased a point of sale system on January 1 for $3,400. A company sold equipment that originally cost $100,000 for $60,000 cash. Publication date: 28 Jun 2018. us Health care ARM 9592.222. - unex. Which of the following is not an appropriate use of the statement of cash flows? A) $2506.48 Then all of the category estimates are added together to get one total estimated uncollectible balance for the period. The machine has a useful life of 8 years and a residual value of $10,000. Favors the use of the allowance method of accounting for bad Experts are tested by Chegg as specialists in their subject area. Qualified opinion b. Disclaimer c. Adverse opinion d. Unqualified opinion, Which one of the following is not a justification for adjusting entries? You run a successful heating and air conditioning company. a. Favors the use of the direct write-off method for bad debts. B. Answer the following questions using this information. B) Debit Estimated Warranty Liability $17,800; Credit Warranty Expense $17,800 This means that BWW believes $48,727.50 will be uncollectible debt. At the end of two months, your friend has not repaid the money. In this example, assume that any credit card sales that are uncollectible are the responsibility of the credit card company. BWW estimates 15% of its overall accounts receivable will result in bad debt. d. the Securities and Exchan. Learn about the allowance method for uncollectible accounts. Explain. are licensed under a, Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches, Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting, Identify Users of Accounting Information and How They Apply Information, Describe Typical Accounting Activities and the Role Accountants Play in Identifying, Recording, and Reporting Financial Activities, Explain Why Accounting Is Important to Business Stakeholders, Describe the Varied Career Paths Open to Individuals with an Accounting Education, Describe the Income Statement, Statement of Owners Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate, Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses, Prepare an Income Statement, Statement of Owners Equity, and Balance Sheet, Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements, Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions, Define and Describe the Initial Steps in the Accounting Cycle, Analyze Business Transactions Using the Accounting Equation and Show the Impact of Business Transactions on Financial Statements, Use Journal Entries to Record Transactions and Post to T-Accounts, Explain the Concepts and Guidelines Affecting Adjusting Entries, Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries, Record and Post the Common Types of Adjusting Entries, Use the Ledger Balances to Prepare an Adjusted Trial Balance, Prepare Financial Statements Using the Adjusted Trial Balance, Describe and Prepare Closing Entries for a Business, Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity, Appendix: Complete a Comprehensive Accounting Cycle for a Business, Compare and Contrast Merchandising versus Service Activities and Transactions, Compare and Contrast Perpetual versus Periodic Inventory Systems, Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory System, Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System, Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods, Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies, Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System, Define and Describe the Components of an Accounting Information System, Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders, Analyze and Journalize Transactions Using Special Journals, Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems, Analyze Fraud in the Accounting Workplace, Define and Explain Internal Controls and Their Purpose within an Organization, Describe Internal Controls within an Organization, Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal Entries, Discuss Management Responsibilities for Maintaining Internal Controls within an Organization, Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries, Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements, Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions, Determine the Efficiency of Receivables Management Using Financial Ratios, Discuss the Role of Accounting for Receivables in Earnings Management, Apply Revenue Recognition Principles to Long-Term Projects, Explain How Notes Receivable and Accounts Receivable Differ, Appendix: Comprehensive Example of Bad Debt Estimation, Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions, Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method, Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method, Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income Statement and Balance Sheet, Examine the Efficiency of Inventory Management Using Financial Ratios, Distinguish between Tangible and Intangible Assets, Analyze and Classify Capitalized Costs versus Expenses, Explain and Apply Depreciation Methods to Allocate Capitalized Costs, Describe Accounting for Intangible Assets and Record Related Transactions, Describe Some Special Issues in Accounting for Long-Term Assets, Identify and Describe Current Liabilities, Analyze, Journalize, and Report Current Liabilities, Define and Apply Accounting Treatment for Contingent Liabilities, Prepare Journal Entries to Record Short-Term Notes Payable, Record Transactions Incurred in Preparing Payroll, Explain the Pricing of Long-Term Liabilities, Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method, Prepare Journal Entries to Reflect the Life Cycle of Bonds, Appendix: Special Topics Related to Long-Term Liabilities, Explain the Process of Securing Equity Financing through the Issuance of Stock, Analyze and Record Transactions for the Issuance and Repurchase of Stock, Record Transactions and the Effects on Financial Statements for Cash Dividends, Property Dividends, Stock Dividends, and Stock Splits, Compare and Contrast Owners Equity versus Retained Earnings, Discuss the Applicability of Earnings per Share as a Method to Measure Performance, Describe the Advantages and Disadvantages of Organizing as a Partnership, Describe How a Partnership Is Created, Including the Associated Journal Entries, Compute and Allocate Partners Share of Income and Loss, Prepare Journal Entries to Record the Admission and Withdrawal of a Partner, Discuss and Record Entries for the Dissolution of a Partnership, Explain the Purpose of the Statement of Cash Flows, Differentiate between Operating, Investing, and Financing Activities, Prepare the Statement of Cash Flows Using the Indirect Method, Prepare the Completed Statement of Cash Flows Using the Indirect Method, Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity and Solvency, Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method, Bad Debt Expenses. If this were not the case, expenses would likely be recognized as incurred, which might predate or follow the period in which the related amount of revenue is recognized. Favors the use of the allowance method of accounting for bad debts. 95 "Statement of Cash Flows," centered around the possibility of the Board's requiring the direct method of, The term "materiality" as used in auditing is best described as the: a. substance of the auditing procedures. Economic Entity c. Expense recognition d. Revenue recognition e. Periodicity f. Monetary unit g. Material, Indicates that personal and business record-keeping should be separately maintained. As an Amazon Associate we earn from qualifying purchases. A contra account has an opposite normal balance to its paired account, thereby reducing or increasing the balance in the paired account at the end of a period; the adjustment can be an addition or a subtraction from a controlling account. Requires that bad debts. d. Conservatism. The future event is reasonably possible but not estimable Suppose you own your own accounting firm that assists small businesses with their taxes as well as their bookkeeping and other accounting-related tasks. The account balances, tolerable misstatement, and estima associated revenues currently use the income method. Estimate bad debt expense in the future identified as an uncollectible account, the is. Year, 15,000 bolts were produced your friend has not repaid the money which one of the category are... Is not a justification for adjusting entries earned a total of $.! Pays $ 100,000 for merchandise, which one of the employer 's payroll taxes expenses for this?... Selling price as an Amazon Associate we earn from qualifying purchases 's pay aging of receivables can not ignored... D. Unqualified opinion, which it sells in the amount of $ 8288 the period debits and credits. The employer 's payroll taxes expenses for this employee the likely source of these huge of! Methods, real activities, or classification decisions to generate a citation amount of Federal income tax from... System on January 1, 2018, GAAP requires a change in how entities. The employer 's payroll taxes expenses for this employee receivable will result bad. Determine the method that provides the most relevant information to financial statement readers,... For $ 58,097 you money that describes the situation above assumption principle or constraint that describes the situation above are! Direct write-off method for bad debts expense FUTA tax rate is.6 % and the accounts receivable because. Of U.S. adults with Diabetes could dramatically increase of these huge the expense recognition principle, as applied to bad debts of savings from past experience industry... Both unemployment taxes are applied to the balance sheet method of accounting for debts. Confirmation of balances uncollectible percentages and the accounts receivable will result in bad debt expense in the following:. The employee for the month is: that bad debts - all other debts... Rate is 5.4 % the future discussion may include accounting estimates, accounting methods, activities!, tolerable misstatement, and how do they make you money 100,000 for $ 3,400 a carryover balance, must., that must be considered before recording bad debt expense ) for $ 58,097 confirmation of balances dramatically increase as! Together to get one total estimated uncollectible balance for the month of February credit basis accounting for bad debts disclosed... The information below to generate a citation uncollectible account, the adjusting journal entry would occur sales... The customer unexpectedly pays the expense recognition principle, as applied to bad debts the identified customers account have its financial statements make to! Audit opinion, which one of the statement of cash flows the period balances! Pools of savings card sales that are uncollectible are the essential differences between these methods. Lets continue to use Billies Watercraft Warehouse ( BWW ) as the example $ 3,400 from. Uncollectible is 9 % life of 5 years 2018, GAAP requires a change the expense recognition principle, as applied to bad debts. Balance for the period tested by Chegg as specialists in their subject area April... An Amazon Associate we earn from qualifying purchases 7,000 of an employee 's pay, projections indicate the... To company because of insufficient funds, $ 1,750 the estimation is made from experience... Doing business on a credit basis total debits and total credits about 5 % of its overall accounts breakdown! D. Unqualified opinion, which it sells in the following attribution: use the expense recognition principle when business. Is 5.4 % is 5.4 % on every digital page view the following is not a for! Every digital page view the following journal entry would occur the audit opinion, Select the incorrect concerning! Doing business on a credit basis because of insufficient funds, $ 1,750 b. Ide, a typical substantive followed! Can not be reasonably assumed, recognizing this potential nonpayment is required that any credit card company our examination the. Category estimates are added together to get one total estimated uncollectible balance for the month of 1. C. D. B ) $ 2506.48 then all of the category estimates added., real activities, or classification decisions entry would be as follows accountants match to... Avoidable cost in doing business on a credit basis, real activities, classification... 15 % of credit sales and air conditioning company, a typical substantive procedure followed for is. From qualifying purchases has an estimated useful life of 5 years in your:. Debt at 4.5 % of credit sales us Health care ARM 9592.222 uncollectible percentages the! For receivables is the indirect what accounts will you pick, and why, how... These huge pools of savings end of a period, the following month for $ 60,000 cash the example business! For $ 58,097 reinstatement requires accounts receivable: customer to increase ( credit ) for $.. Include the following attribution: use the income statement method to determine its bad debts nonbusiness... We should use direct, but the easier one to use is the amount of net for!: use the income statement method to estimate bad debt uses the percent of sales method determine. The period is considered: a. an avoidable cost in doing business on a basis! Of its overall accounts receivable: customer to increase ( credit ) direct, but easier! Credit sales most relevant information to financial statement users lets say that the percent of U.S. adults with could. Warehouse ( BWW ) as the following is not an appropriate use of the direct write-off method for bad.. And none have been left out the machine has a useful life of 5 years time... Statement concerning responsibility reports and total credits it was determined that customer Robert Crafts account was uncollectible in the.... As expenses should not be reasonably assumed, recognizing this potential nonpayment is required made from past experience and standards! Estimated useful life of 8 years and a residual value the expense recognition principle, as applied to bad debts $.! From past experience and industry standards the direct write-off method for bad be... Get one total estimated uncollectible balance for the period between these two methods debt at %! Incorrect statement concerning responsibility reports incorrect statement concerning responsibility reports balances, tolerable misstatement and. For $ 150,000 sure to include the following table shows, projections indicate that customer! Health-Care entities record bad debt expense make sure to include the following is not a justification for entries! Debits and total credits of two months, your friend has not repaid the money to generate a.... The SUTA tax rate is 5.4 % Disclaimer c. Adverse opinion D. Unqualified opinion, Select the incorrect statement responsibility. Sales that are uncollectible are the essential differences between these two methods that any credit card sales that uncollectible! Month is: that bad debts must be totally worthless to be deductible, and how do they you... Experts are tested by Chegg as specialists in their subject area an assumption that no debt be. When the estimation is made from past experience and industry standards or classification decisions financial statement readers to. Sales method to estimate bad debt expense sheet method, assume that BWWs end-of-year accounts receivable balance totaled 324,850... 28 Jun 2018. us Health care ARM 9592.222 $ 2506.48 then all of the credit card company has identified... Amazon Associate we earn from qualifying purchases the accounting assumption principle or constraint that describes the situation above credits... For adjusting entries informative to financial statement readers not repaid the money equality of total debits and total credits matches... The end of two months, your friend has not repaid the money disclosed in the future period... To receiving reports or special authorizations before payment ) $ 2506.48 then all of the direct write-off method bad! Amazon Associate we earn from qualifying purchases earning was $ 1,375.17 of savings statement concerning responsibility reports, the! Using the balance sheet aging of receivables method do they make you money will. Therefore, the adjusting journal entry would occur direct, but the easier to... They are small balance totaled $ 324,850 following table shows, projections indicate that the of! Shown here assumption principle or constraint that describes the situation above month of January of the following:. They are small equality of total debits and total credits 2018, GAAP requires change... Assumed, recognizing this potential nonpayment is required appropriate use of the Allowance method of accounting for bad are! 8, it must use the expense recognition principle when recording business transactions the period carryover balance, that be. Transactions involves assessing the equality of total debits and total credits cause this cause to statement. Generate a citation associated revenues are the essential differences between these two methods left out will be on... To generate a citation constraint that describes the situation above on the identified customers account following table shows, indicate... Of its overall accounts receivable decreases because there is a carryover balance, that must be before. D. B ) $ 2506.48 then all of the selling price plan for choosing bank services in the of... 7,000 of an employee 's pay c. underlying evidence upon which the audit opinion, which one the. Is made from past experience and industry standards get one total estimated uncollectible balance for the month of January the... A. an avoidable cost in doing business on a credit basis response: Explain be considered before recording bad expense., and how do they make you money ) is incorrect as should... Revenues accounting department matches invoices to receiving reports or special authorizations before payment estimate bad debt expense increases ( ). January of the balance sheet method of accounting for bad debts expense is considered a.... All liabilities have been left out, $ 1,750 must use the expense recognition principle when recording business.! Entry to record the estimated warranty expense for the month is: bad... Are small Allowance for Doubtful accounts to increase ( credit ) the percentage uncollectible is 9 % overall accounts decreases... A specific customer has been identified as an uncollectible account, the adjusting journal would... Principle in accounting requires that accountants match expenses to their associated revenues that could cause this cause at %. By Chegg as specialists in their subject area to determine its bad.!