Question

Explain how to record the collection of an account receivable in the same year in which it was previously written off if the allowance method of recording estimated doubtful accounts is used.

Answer 1

Under the allowance method of recording estimating doubtful accounts When cash received from an accounts receievable which was previouly written off, first such account receivable should be reinstated by debiting the Accounts Receivable and crediting the allowance for dountful accounts. Later, Cash should be debited and account receivable should be credited for the cash collection from such accounts receivable. The Journal Entries as follows 1 To reinstate the accounts receivable Debit Accounts Receivable Allowance for doubtful accounts Credit 2 for the cash collection Debit Cash Accounts Receivable Credit