1. Accounting 3 Chapter 20 Section 2

2. Journalizing Writing Off an Uncollectible Account Receivable When a customer account is determined to be uncollectible, a journal entry is made to cancel the uncollectible account. This entry cancels the uncollectible amount from the General Ledger account Accounts Receivable as well as the customer account in the Accounts Receivable Ledger.

3. Journalizing Writing Off an Uncollectible Account Receivable The accounts affected in this entry are: Allowance for Uncollectible Accounts (because this is an account just for money we assume we are not going to receive, once we know that we are definitely not going to receive it, the amount must be deducted from this account) Accounts Receivable and the customer account. To journalize, you will debit AUA in order to decrease it and credit AR and the customer account in order to decrease as well. Example transaction and visual steps on next slide.

4. January 3. Wrote off Ryan Recreation’s past-due account as uncollectible, $462.00. Memorandum No. 2. General Journal Page ___ DateAccount Title Post Ref. Doc. No. DebitCredit 18 3Allowance for Uncollectible AcctsM2 4 6 2 00 Accts Rec / Ryan Recreation 4 6 2 00

5. Posting an Entry to Write Off an Uncollectible Account Receivable Posting this type of transaction is not any different than what we have learned already except for the customer account in the Accounts Receivable Ledger. When you get to this account, you are going to write Written Off in the Item portion of the account (yes we finally learn what this spot is for ) A visual presentation for this portion of the posting on next slide.

6. Posting to cancel a Written Off account in the Accounts Receivable Ledger CustomerCust No. DateItem Post Ref DebitCredit Debit Balance Ryan Recreation180 Apr 6 S12 4 6 2 00 4 6 2 00 3Written OffG18 4 6 2 00Jan Because January is a new year, you would need to add 2007 above January in the Date column. *In the computerized accounting, you would not do the written off comment. It is not shown on our software.

7. Reopening an Account Previously Written Off In some cases, customers are able to pay off their debt after their account has already been written off. The first step in reinstating the account is to “re-enter” the monies into all accounts affected. If we do not “re- enter” the monies into the correct accounts, then our totals in other accounts will not be accurate. AR will be increased along with the customer account by a debit. AUA will be increased by a credit. Example transaction and visual steps on next slide.

8. January 29. Received cash in full payment of Ryan Recreation’s account, previously written off as uncollectible, $462.00. Memorandum No. 3 and Receipt No. 8. General Journal Page ___ DateAccount Title Post Ref. Doc. No. DebitCredit 18 29Accts Rec / Ryan RecreationM3 4 6 2 00 Allowance for Uncollectible Accts 4 6 2 00

9. Recording Cash Received for an Account Previously Written Off After the entry to reopen a customer’s account is recorded in the General Ledger, the second step is to record the cash received on that account in the Cash Receipts Journal. This entry is done as any cash receipt transaction would be. Visual steps on next slide.

10. Cash Receipts Journal Page ___ Date Account Title Post Ref. GENERAL DEBITCREDIT Accts Rec. Credit Sales Credit Cash Debit Doc No. Sales Tax Payable Debit Credit Sales Dis. Debit 51 Jan 29Ryan RecreationR8462.00

11. Posting Entries for Collecting a Written-Off Account Receivable Because this entry involved two journals, we must do a multiple-step posting. The first is to post from the General Journal. This is not any different than what we have learned before until we get to the customer account. When you get to the customer account, you must write Reopen account in the item space (yes, we get to use it again ). The second step is to post from the Cash Receipts Journal. The only thing to post from it is the Accounts Receivable credit to show the customer paid off what was owed. Steps will be demonstrated in the Work Together problem.

12. Work Together p. 536 General Journal on this slide, Cash Receipts Journal on next slide. General Journal Page ___ DateAccount Title Post Ref. Doc. No. DebitCredit 6 Jun3Allowance for Uncollectible AcctsM141130 3 9 6 00 Accts Rec / Kelton Corporation 1125 120 3 9 6 00 12Allowance for Uncollectible AcctsM181130 5 7 5 00 Accts Rec / Matlin Company 5 7 5 00 1125 140 13Accts Rec / Marris, Inc.M19 1125 130 5 7 1 00 Allowance for Uncollectible Accts1130 5 7 1 00 25Allowance for Uncollectible AcctsM231130 8 1 9 00 Accts Rec / Johnston, Inc. 1125 110 8 1 9 00 30Accts Rec / Kelton CorporationM27 1125 120 3 9 6 00 Allowance for Uncollectible Accts1130 3 9 6 00 CRJ CRJ=Cash Receipts Journal. This is hyperlinked so that you can look right after the GJ journalizing or you can wait until you are completely finished with the GJ and then go to the CRJ.

13. Cash Receipts Journal Page ___ Date Account Title Post Ref. GENERAL DEBITCREDIT Accts Rec. Credit Sales Credit Cash Debit Doc No. Sales Tax Payable Debit Credit Sales Dis. Debit 9 Jun 13 Marris, Inc.R134130571.00 30Kelton Corp.R152120396.00 Assignmen t

14. Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT General Ledger Accounts Receivable1125 Jun 1 Balance 62 4 5 8 00 3 G6 3 9 6 00 62 0 6 2 00 12 G6 5 7 5 00 61 4 8 7 00 13 G6 5 7 1 00 62 0 5 8 00 25 G6 8 1 9 00 61 2 3 9 00 30 G6 3 9 6 00 61 6 3 5 00 Allowance for Uncollectible Accounts 1130 Jun 1 Balance 8 4 5 8 00 3 G6 3 9 6 00 8 0 6 2 00 12 G6 5 7 5 00 7 4 8 7 00 13 G6 5 7 1 00 8 0 5 8 00 25 G6 8 1 9 00 7 2 3 9 00 30 G6 3 9 6 00 7 6 3 5 00

15. CustomerCust No. DateItem Post Ref DebitCredit Debit Balance CustomerCust No. DateItem Post Ref DebitCredit Debit Balance Accounts Receivable Ledger Johnston, Inc. 110 Jan 5 S1 8 1 9 00 8 1 9 00 Jun 25 Written Off G6 8 1 9 00 Kelton Corporation 120 Mar 2 S3 3 9 6 00 3 9 6 00 Jun 3 Written Off G6 3 9 6 00 30 Reopen Account G6 3 9 6 00 3 9 6 00 30 CR9 3 9 6 00CR9 Click on CR9 hyperlink to get back to Cash Receipts Journal

16. CustomerCust No. DateItem Post Ref DebitCredit Debit Balance CustomerCust No. DateItem Post Ref DebitCredit Debit Balance Accounts Receivable Ledger Marris, Inc. 130 Feb 14 Written Off G2 5 7 1 00 Jun 13 Reopen Account G6 5 7 1 00 5 7 1 00 13 CR9 5 7 1 00CR9 Matlin Company140 Mar 4 S3 5 7 5 00 5 7 5 00 Jun 12 Written Off G6 5 7 5 00

17. Assignment Do Application 20-2 and 20-3 by hand. Turn it into Mrs. Middleton. Do Mastery 20-4 with Automated Accounting software. Print off all the general and cash receipts journal before you do the adjusting entry. Once you have finished the adjusting entry print the general journal for just 12-31-07. Print the general and accounts receivable ledgers. Turn it into Mrs. Middleton. Move on to Chapter 21.