Thank you so much for this. Learning online through just text is so difficult. Thank you so much for providing examples WITH explanations. So very helpful!
You are the best thank you so much for taking the time to teach student all around the world all these concepts. I love this and you are helping me understand so much better! You are the best!!!
Hello I just subscribed and I enjoy watching your videos. I am currently in college taking principles of accounting classes and I watch your videos for even more help and examples throughout my journey and it helps me a lot to learn complex meanings to even simpler definitions as you describe them !!:) By any chance, do you have a video explaining stocks and bonds? Love your videos!
@@iamyourfathernamjoon7202 Maybe about 20 or 30 videos. I try to leave comments and like each video I see (that I like) as a way to thank the creator and pick up random discussions. How are you doing? Did you watch this video because you're taking an accounting class?
Hi Mr.Bell Beginning A/R = $100,000 Credit Sales = $500,000 Cash Collection = $400,000 5% of Credit sale 5% of Receviable Find the ending Account Receivable by % sale method and % Receivable method thank you in advance
Sorry - I don't take student question submissions - I'll answer questions about my own vids/workbook, but no outside questions (it caused me problems in the past as I unwittingly was doing homework assignments for students!)
Hello Sir, Great Video! I have a question though- Am I correct in saying that the allowance for doubtful accounts is a contra asset account? Thanks, Piyush
hello prof , after the company pays in sept 22,2024 could we just say Debit cash 4,000 credit allowance 4,000 because the A\R account is already closed so we just need to close the allowance and this does it or should i take the long route as u showed in the video ?
if the company was only writing off a portion of the a/r would you do the same except with only the amount of the portion of the a/r being written off? thank you in advance
The issue here is we received cash against a receivable that no longer exists on our books. So first we need to make the receivable "re-exist" then apply the cash against that account!
Hello Tony and thank you for working this type of problem. I completely understand this concept. Please advise would this same type of transaction be just as simple if the customer comes back say a year later and pays in a different period. Would there be any additional steps that would need to be taken or simply do what you did here?
@@Tony-Bell Thank you Tony! BTW! I agree with the comments, ur instructions are spot on! So glad I found ur channel🥰🥰🥰 Hope ur new year is off to a great start!
@@Tony-Bell Thank you for the helpful videos. In the last step, what happens to the remaining $4,000 in the allowance? Which account does it now offset based on your entry? I'm curious if we can simply debit our cash and credit other income since we have deemed the money non-recoverable in the past.
When Good Sleep finally pays, why can't you debit cash and credit allowance for doubtful accounts? Seems like debiting A/R and crediting allowance, then debiting cash and crediting A/R is an extra step. What am I missing? Wouldn't you almost consider it a cash sale at that point? Revenue has already been accounted for, but it is cash changing hands, so that's why I am asking. Thank you!
Nothing changes for bad debt expense here. The only times (among the cases discussed by Tony on his FA videos so far) where you debit bad debt expense is when you estimate that you might have uncollected receivables. The only time you credit bad debt expense is at the end of the year if an adjustment is required. If you have less uncollected debt than you estimated by the end of the year. Then, the adjustment entry would be: CR Bad debt expense for the unnecessary allowance (because you have more allowance than you need) and DR Allowance for the same amount. Example: Initial Allowance for Doubtful Accounts: $4,000 Actual uncollected debt: $1,000 Remaining balance in Allowance for Doubtful Accounts: $3,000 You must reduce the Allowance for Doubtful Accounts to reflect the lower uncollectible amount. The adjusting entry would decrease the allowance and reverse some of the previously recorded Bad Debt Expense. Initial Estimate Entry: Debit: Bad Debt Expense $4,000 Credit: Allowance for Doubtful Accounts $4,000 By the end of the year, we realize that we only have $1,000 in uncollected debt. (We overestimated allowance by $3,000.) Adjusting Entry at Year-End (Remove the unnecessary $3000 from our allowance): Debit: Allowance for Doubtful Accounts $3,000 Credit: Bad Debt Expense $3,000
You definitely can do it that way. I do it in 2 steps to explain what's happening. As long as we both end up in the same place (WE DO!) I'd think it's fine. EDIT - There may be funny things that need to be done in accounting software for a real company - ie Quickbooks - to make this work - but doing it by hand, I think either way is ok as long as you understand what's going on.
@@medhavikosta3889 but what about the revenue ,since they where didected by expense last year,but the customer paid after the end of year so we should add to revenue as well
@@medhavikosta3889 yes but what about revenue,when we add to expenses the bad accounts ,we going to diduct them for revenue,but after the under the fiscal year,the customer payed us back,so we have to add it to the current years rev
Excellent video, just a couple of questions: What happens if the write-off is bigger than the original expected bad debt (as for example, we had a really bad estimate), and the receivables are never paid ? How do we set the net receivables on the balance sheet to zero ? Because in this case it seems that the (gross) account receivables and the allowance for doubtful accounts move together, in such a manner that the net receivables don't change. Thanks !
Hey Eduardo, Good question! So to write off a bad debt, DR Allowance, CR A/R - so you're right that our A/R, net doesn't change as a result. Here's a typical situation. I have 100 customers, each owes me 1K, (So 100K of A/R). And I have an allowance of 10K. Let's say 15 of those customers go bad, and I need to write them off. DR Allowance, CR A/R. But I've used more allowance than I've got! We just make an adjustment to the allowance at year end to cover it (DR Bad Debt Exp, CR Allowance). We may need to write off a customer's entire AR, but it is unlikely we will need to write off ALL of our AR at once. Hope this helps and great question. -Tony
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I love that you make me laugh while I learn!
Can't believe that they said accounting class will be boring. I'm having a blast haha!
@@ahmedelharouchi6798 Depends on who teaches it!
Ouuu get in there Tony mate😏
Thank you so much for this. Learning online through just text is so difficult. Thank you so much for providing examples WITH explanations. So very helpful!
You are the best thank you so much for taking the time to teach student all around the world all these concepts. I love this and you are helping me understand so much better! You are the best!!!
You are teaching in Easy and engaging way💗keep it up sir
Thank you, that was very helpful. I didn't think about the second entry for Cash and A/R.
Hello
I just subscribed and I enjoy watching your videos. I am currently in college taking principles of accounting classes and I watch your videos for even more help and examples throughout my journey and it helps me a lot to learn complex meanings to even simpler definitions as you describe them !!:)
By any chance, do you have a video explaining stocks and bonds?
Love your videos!
no other teacher could have taught me better than you sir, thank YOU!!!!!
Write off a receivable? More like "The educational value of these videos is unbelievable!" Thanks again, for each and every one of them.
girl!
how many vids of his did you comment on?
@@iamyourfathernamjoon7202 Maybe about 20 or 30 videos. I try to leave comments and like each video I see (that I like) as a way to thank the creator and pick up random discussions.
How are you doing? Did you watch this video because you're taking an accounting class?
U r the best tony my class is so hard for me but u make all easy thanks
Thank you for the helpful videos. I whacked 🔨 the like button to support the channel!
Shout out to my 186th time visiting your channel while working on my capstone
Haha - let me know when you get to 187 - then I'll know you're a "true fan" 😆
Hi Mr.Bell
Beginning A/R = $100,000
Credit Sales = $500,000
Cash Collection = $400,000
5% of Credit sale
5% of Receviable
Find the ending Account Receivable by % sale method
and % Receivable method
thank you in advance
Sorry - I don't take student question submissions - I'll answer questions about my own vids/workbook, but no outside questions (it caused me problems in the past as I unwittingly was doing homework assignments for students!)
What do i have to do when there is already a credit balance to the doubtfull account (a credit balance)
I think things would still work the same way. The allowance for doubtful accounts would just become a larger credit.
Thank you so much. Very helpful!!!!!!!!
Hello Sir,
Great Video!
I have a question though-
Am I correct in saying that the allowance for doubtful accounts is a contra asset account?
Thanks,
Piyush
Correct!
VERY HELPFUL AND USFUL THANK YOU SO MUCH
hello prof ,
after the company pays in sept 22,2024
could we just say
Debit cash 4,000
credit allowance 4,000
because the A\R account is already closed so we just need to close the allowance and this does it
or should i take the long route as u showed in the video ?
If I were doing the adjustment, I'd do it your way for sure!
Bonus was clutch thank you so much
if the company was only writing off a portion of the a/r would you do the same except with only the amount of the portion of the a/r being written off?
thank you in advance
Correct!
You are a lifesaver 🙏🏼
If we receive cash from the company, shouldn’t we record the inflow of cash first?
Amazing videos btw. Really appreciated
The issue here is we received cash against a receivable that no longer exists on our books. So first we need to make the receivable "re-exist" then apply the cash against that account!
Hello Tony and thank you for working this type of problem. I completely understand this concept. Please advise would this same type of transaction be just as simple if the customer comes back say a year later and pays in a different period. Would there be any additional steps that would need to be taken or simply do what you did here?
Great question - and the answer here is.... I'm not 100% sure, but I *think* I would just do exactly what we've done here.
@@Tony-Bell Thank you Tony! BTW! I agree with the comments, ur instructions are spot on! So glad I found ur channel🥰🥰🥰 Hope ur new year is off to a great start!
@@Tony-Bell Thank you for the helpful videos. In the last step, what happens to the remaining $4,000 in the allowance? Which account does it now offset based on your entry? I'm curious if we can simply debit our cash and credit other income since we have deemed the money non-recoverable in the past.
Succinct and helpful as always. Thank you sir!
why cant we directly debit cash and credit the allowance account, when the customers decides to pay back after we have written him off.
Yes, you can. Just combine those two entries in the video.
Yeah, I just noticed he debit and credit 4k from A/R so it just cancels out lol
Idk, perhaps it's usually done in two separate journal entries by convention or for some other reason...
@@PunmasterSTP yes it is an accounting principle under GAAP for credit sales companies, to use the allowance method
@@alaylaali9777 Thanks for filling in that GAAP in our knowledge!
When Good Sleep finally pays, why can't you debit cash and credit allowance for doubtful accounts? Seems like debiting A/R and crediting allowance, then debiting cash and crediting A/R is an extra step. What am I missing? Wouldn't you almost consider it a cash sale at that point? Revenue has already been accounted for, but it is cash changing hands, so that's why I am asking. Thank you!
You absolutely can do it the way you've suggested - and in fact that's how I'd do it in practice!
What happens now to the Allowance for bad debts account after collecting that AR?
Nothing changes for bad debt expense here. The only times (among the cases discussed by Tony on his FA videos so far) where you debit bad debt expense is when you estimate that you might have uncollected receivables.
The only time you credit bad debt expense is at the end of the year if an adjustment is required. If you have less uncollected debt than you estimated by the end of the year. Then, the adjustment entry would be: CR Bad debt expense for the unnecessary allowance (because you have more allowance than you need) and DR Allowance for the same amount.
Example:
Initial Allowance for Doubtful Accounts: $4,000
Actual uncollected debt: $1,000
Remaining balance in Allowance for Doubtful Accounts: $3,000
You must reduce the Allowance for Doubtful Accounts to reflect the lower uncollectible amount. The adjusting entry would decrease the allowance and reverse some of the previously recorded Bad Debt Expense.
Initial Estimate Entry:
Debit: Bad Debt Expense $4,000
Credit: Allowance for Doubtful Accounts $4,000
By the end of the year, we realize that we only have $1,000 in uncollected debt. (We overestimated allowance by $3,000.)
Adjusting Entry at Year-End (Remove the unnecessary $3000 from our allowance):
Debit: Allowance for Doubtful Accounts $3,000
Credit: Bad Debt Expense $3,000
nice video Tony!!🤩
Thank you, alwasy well explained.
Happy Belated Birthday to Tony Bell's wife! 🥳
Why are two separate entries needed for the correction? Why can’t we just debit cash and credit the allowance?
You definitely can do it that way. I do it in 2 steps to explain what's happening. As long as we both end up in the same place (WE DO!) I'd think it's fine. EDIT - There may be funny things that need to be done in accounting software for a real company - ie Quickbooks - to make this work - but doing it by hand, I think either way is ok as long as you understand what's going on.
@@Tony-Bell thank you so much. Wanted to make sure there wasn’t a GAAP rule about that
What form is allowance ?
Thank u so much sir
but what if the customer comes to pay after the financial year is ended already?
Ismail Ismaili then just take that money home with you...buy a nice bottle of Whiskey
make the adjustments for the next fiscal year, this data will carry forward, its not zeroed out.
@@medhavikosta3889 but what about the revenue ,since they where didected by expense last year,but the customer paid after the end of year so we should add to revenue as well
@@aymenferhat5130 A/R under asset will get debited and cash account under asset will get credited!
@@medhavikosta3889 yes but what about revenue,when we add to expenses the bad accounts ,we going to diduct them for revenue,but after the under the fiscal year,the customer payed us back,so we have to add it to the current years rev
Thanks
awesome guy
Excellent video, just a couple of questions: What happens if the write-off is bigger than the original expected bad debt (as for example, we had a really bad estimate), and the receivables are never paid ? How do we set the net receivables on the balance sheet to zero ? Because in this case it seems that the (gross) account receivables and the allowance for doubtful accounts move together, in such a manner that the net receivables don't change. Thanks !
Hey Eduardo, Good question! So to write off a bad debt, DR Allowance, CR A/R - so you're right that our A/R, net doesn't change as a result.
Here's a typical situation.
I have 100 customers, each owes me 1K, (So 100K of A/R). And I have an allowance of 10K.
Let's say 15 of those customers go bad, and I need to write them off. DR Allowance, CR A/R.
But I've used more allowance than I've got! We just make an adjustment to the allowance at year end to cover it (DR Bad Debt Exp, CR Allowance).
We may need to write off a customer's entire AR, but it is unlikely we will need to write off ALL of our AR at once.
Hope this helps and great question.
-Tony
Hello Tony, thanks a lot for your answer, and also thanks for the high quality material that you made available here on youtube! Best Regards
Rossie Gateway
i love you tony
we will take your money please tone (the climax of this video)
Towne Mews
2:11 what a coincidence