标题: write-off: revenue vs cash collected [打印本页] 作者: chunty 时间: 2011-7-11 19:09 标题: write-off: revenue vs cash collected
vol2 pg383 says "write-offs will reduce the gross accounts receivable balance" -- this I understand.
"We can infer a $0.025 billion write-off from the decrease in the allowance for doubtful accounts" -- I thought allowance for doubtful accounts was used to reduce accounts receivable. Shouldn't a write-off be the case where such allowance increased, unless the write-off refers to the allowance itself? Because of this I am not getting the formula on the next age.作者: wxs1986 时间: 2011-7-11 19:09
You set up an allowance first.
then you decrease it.
when you decrease the allowance - the flip side is a decrease due to doubtful accounts.
Accounts Receivable XXX
Doubtful Accounts (YYY)
Allowance for Doubtful accounts (YYY) <- This is the balancing entry for the line immediately above.
Doubtful accounts (YYY) would be on the Asset side of the Balance sheet - shown immediately below the Accounts Receivable and then there would be a Net Accounts Receivable.
The Allowance for Doubtful accounts would show a Decrease year on year when this transaction is complete.
CP作者: ayodayo 时间: 2011-7-11 19:09
What's the difference between Allowance for Doubtful accounts and just Doubtful Accounts?
So write-off just means decreasing the allowance for doubtful accounts? It sounds to me like the write-off in the first sentece refers to writing off accounts receivable, but the write-off in the second sentence and in the formula on the next page refers to writing off doubtful accounts. The formula (Revenue - Cash collected = Increase in gross accounts receivable + Write offs - Increase in unearned revenue) seems to imply write off = decrease in allowance = increase in receivables reported.
