Question

The following information is taken from the 2010 annual report to shareholders of Hewlett-Packard (HP) Co.

Required:

 a/ What is the balance in HP's allowance for doubtful accounts at the end of the fiscal years 2010 and 2009, respectively?

b/ What kind of account is the provision for doubtful accounts in HP's financial statements? (Note: Provision for doubtful accounts is synonymous with bad debt expense; that is, the charge against income for estimated uncollectible accounts from credit sales in that period) 

c/ Using a T-account for the allowance for doubtful accounts, identify the amounts written off during the year 2010.

Answer 1

a) Balance for Prov for Bad & doubtful Debt = Gross A/C Receivable - Net A/C Receivable

For yr ended 20009:- 17166-16537=629

For yr 2010:- 19006-18481 = 525

b) provision for doubtful debts is a liability Account in financial statements.

c) Bad debts w/off during the year 2010:

Dr	Prov for Doubtful Allowance for year 2010	cr
Particulars	Amt	Particulars	Amt
		Opening Bal c/f	629
Bad debts w/off(b/f)	260	Provision booked during the year	156
Closing bal	525
Total	785	Total	785