FSA: allowance for AR increase

dandman

what is allowance for AR, when it is reversed, will it increase Asset or Liability? How does it work? Thanks.

Pegasus2008

freakingout Wrote:
-------------------------------------------------------
> Somehow I disagree. You don't reduce AR when
> reserved because you didn't recognize that as AR
> in the 1st place. And I don't understand your 1st
> paragraph.

Sorry for confusing you.

In the balance sheet Accounts Receivable is always shown as net:

Gross Accounts Receivable - Provision for doubtful debts (PDD) = Net Accounts Receivable.

Now since we are going to reverse the provision, you will be reducing PDD which is going to increase Net A/R. But if you reduce PDD, it has to balance somewhere, and that is going to be equity (it increases) through the I/S (basically a gain).

Then we go to the next step that is decrease Net A/R (since Gross A/R will decrease) and increase cash.

ryanlb

Allowance for AR: based on past experience, can be a % of AR, this will reduce AR and increase expense in IS

When reversed: reversed when the AR is actually paid, increase cash and increase other income (?).

CPK please help!

WarrenB1

sounds like bad debt provision