Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 8 - Reporting and Analyzing Receivables - Broadening Your Perspective - Financial Reporting and Analysis - Page 442: BYP8-5


(a) The company may use the percentage of receivables method for uncollectible. (b) In the Direct write-off method, the bad debt is written-off, when a customer fails to pay the dues, and it is confirmed that his outstanding amount cannot be recovered. (c) The implications for a company's receivables management of selling products internationally is that the company may look to market its product in some other countries, than selling it in Japan.

Work Step by Step

(a) As Japanese acknowledge the amount due, but have not been able to pay because of slow economy in Japan, the chances of non recovery are very much. (b) However in the case of percentage of receivable method, a fixed percentage of receivable, based on its period of outstanding, is written off as Allowance for Doubtful accounts. The percentage of uncollectible is decided based on the number of days past dues. The more number of days past due, higher is the percentage of allowance.
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