1. LESSON 14-4
5/24/2019
LESSON 14-4
Planning and Recording an Allowance for Uncollectible Accounts Adjustment

2. Uncollected Debts
With every sale made an account, a business takes a risk that their customers may not pay them
The risk of uncollected accounts turns into an expense (Uncollectible Accounts Expense)
LESSON 14-4

3. Since it is impossible to accurately guess what percent of customers will not pay us, we have to estimate how many accounts will remain unpaid.
LESSON 14-4

4. ESTIMATING UNCOLLECTIBLE ACCOUNTS EXPENSE
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Estimated Uncollectible Accounts Expense =
Percentage ×
Total Sales on Account
$124,500.00 × 1% =
$1,245.00
LESSON 14-4

5. ANALYZING AND RECORDING AN ADJUSTMENT FOR UNCOLLECTIBLE ACCOUNTS EXPENSE
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1. Enter the estimated uncollectible amount.
2. Enter the same amount in the Adjustments Debit column.
3. Label the two parts with a small letter e in parentheses.
LESSON 14-4

6. 14-4 Work Together
424,000 x .005 = $2,120
LESSON 14-4

7. TERMS REVIEW uncollectible accounts
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uncollectible accounts
allowance method of recording losses from uncollectible accounts
book value
book value of accounts receivable
LESSON 14-4