Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

When a previously written off account is collected, which journal entry is most appropriate?

Debit Accounts Receivable; Credit Allowance for Doubtful Accounts

Debit Bad Debt Expense; Credit Cash

Debit Cash; Credit Accounts Receivable

Debit Accounts Receivable; Credit Allowance for Doubtful Accounts, then Debit Cash; Credit Accounts Receivable

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Verified step by step guidance

Step 1: Understand the scenario. A previously written-off account means that the company had earlier deemed the account uncollectible and removed it from Accounts Receivable by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable.

Step 2: When the account is collected, the first step is to reverse the write-off. This is done by debiting Accounts Receivable to reinstate the account and crediting Allowance for Doubtful Accounts to reduce the allowance balance.

Step 3: After reinstating the account, record the collection of cash. This is done by debiting Cash to reflect the receipt of money and crediting Accounts Receivable to remove the balance from the customer's account.

Step 4: Ensure that the journal entries are properly recorded in the general ledger. The reversal entry and the cash collection entry should be posted separately to maintain clarity in the accounting records.

Step 5: Review the impact of these entries on the financial statements. The reversal increases Accounts Receivable and decreases Allowance for Doubtful Accounts, while the cash collection increases Cash and decreases Accounts Receivable.