LESSON 7 1 Direct WriteOff Method of Recording

LESSON 7 -1 Direct Write-Off Method of Recording Uncollectible Accounts Uncollectible accounts Direct write-off method CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

2 Chapter 7 Objectives Accounting for Uncollectible Accounts After studying Chapter 7, you will be able to: n Define accounting terms related to uncollectible accounts. n Identify accounting concepts and practices related to uncollectible accounts. n Calculate and record estimated uncollectible accounts expense using the direct write-off method. n Calculate and record estimated uncollectible accounts expense using the allowance method. n Calculate and analyze accounts receivable turnover ratios. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

3 Lesson 7 -1 n uncollectible accounts: accounts receivable that cannot be collected n writing off an account: canceling the balance of a customer account because the customer is not expected to pay n direct write-off method of recording losses from uncollectible accounts: recording uncollectible accounts expense only when an amount is actually known to be uncollectible CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

4 RECORDING UNCOLLECTIBLE ACCOUNTS EXPENSE page 201 November 15. Wrote off James Nordquist’s past due account as uncollectible, $50. 00. Memorandum No. 21. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

5 COLLECTING A WRITTEN-OFF ACCOUNT— DIRECT METHOD page 202 January 21. Received cash in full payment of James Nordquist’s account, previously written off as uncollectible, $50. 00. Memorandum No. 54 and Receipt No. 49. 1 2 1. Make an entry to reopen the account. 2. Make an entry to record the cash receipt. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

6 DEFINE TERMS REVIEW In Quizlet page 203 Create: Chapter 7 Adv. Acc (then SAVE) n uncollectible accounts n writing off an account n direct write-off method of recording losses from uncollectible accounts CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

7 Exit Ticket for today: Audit Your Understanding 7 -1 In a Word Document, Save. AS: Chapter 7 -1 AYUYour. Name And drop in my Inbox today! 1. Why should the amount of an uncollectible account be removed from the assets of a business? 2. In the direct write-off method, how is an uncollectible account closed? 3. Why is the customer account reopened when cash is received for an account previously written off as uncollectible? CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1

8 Complete the following assignments for Chapter 7 -1 today n Define Terms Review on page 201. n Answer Audit Your Understanding questions on page 201. n Complete Work Together 7 -1 on Aplia – page 201. n Complete On Your Own 7 -1 on Aplia – page 201. n Complete Application Problem 7 -1 on Aplia – page 215. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7 -1