What is the journal entry to record a credit sale to accounts receivable?
When a company sells merchandise on credit to a customer, the debit is to accounts receivable and the credit is to revenue. Remember, a debit to accounts receivable increases the account, which is an asset on a balance sheet.
Then, when the customer pays cash on the receivable, the company would debit cash and credit accounts receivable. A credit to accounts receivable decreases the account.
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How do you calculate the allowance for bad debt reserve using the percentage of accounts receivable method?
This method computes the estimated allowance for uncollectible accounts based on the amount of year-end accounts receivables. This amount will be the amount that will compute as the year-end allowance account balance. You will then be able to back into the current year expense (aka the recorded bad debt expense).
How do changes in accounts receivable impact a company’s cash flow statement?
When a company’s accounts receivable balance increases, that results in a decrease to net cash flows. A decrease in accounts receivable results in an increase to net cash flows.