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LESSON 7-1 Direct Write-Off Method of Recording Uncollectible Accounts Uncollectible accounts Direct write-off method CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 Chapter 7 Objectives Accounting for Uncollectible Accounts After studying Chapter 7, you will be able to: Define accounting terms related to uncollectible accounts. Identify accounting concepts and practices related to uncollectible accounts. Calculate and record estimated uncollectible accounts expense using the direct write-off method. Calculate and record estimated uncollectible accounts expense using the allowance method. Calculate and analyze accounts receivable turnover ratios. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 3 Lesson 7-1 uncollectible accounts: accounts receivable that cannot be collected writing off an account: canceling the balance of a customer account because the customer is not expected to pay direct write-off method of recording losses from uncollectible accounts: recording uncollectible accounts expense only when an amount is actually known to be uncollectible CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 4 RECORDING UNCOLLECTIBLE ACCOUNTS EXPENSE page 201 November 15. Wrote off James Nordquist’s past due account as uncollectible, $50.00. Memorandum No. 21. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 5 COLLECTING A WRITTEN-OFF ACCOUNT— DIRECT METHOD page 202 January 21. Received cash in full payment of James Nordquist’s account, previously written off as uncollectible, $50.00. Memorandum No. 54 and Receipt No. 49. 1 2 1. Make an entry to reopen the account. 2. Make an entry to record the cash receipt. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 6 DEFINE TERMS REVIEW In Quizlet page 203 Create: Chapter 7 AdvAcc (then SAVE) uncollectible accounts writing off an account direct write-off method of recording losses from uncollectible accounts CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 7 Exit Ticket for today: Audit Your Understanding 7-1 In a Word Document, SaveAS: Chapter7-1AYUYourName And drop in my Inbox today! 1. Why should the amount of an uncollectible account be removed from the assets of a business? 2. In the direct write-off method, how is an uncollectible account closed? 3. Why is the customer account reopened when cash is received for an account previously written off as uncollectible? CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1 8 Complete the following assignments for Chapter 7-1 today Define Terms Review on page 201. Answer Audit Your Understanding questions on page 201. Complete Work Together 7-1 on Aplia – page 201. Complete On Your Own 7-1 on Aplia – page 201. Complete Application Problem 7-1 on Aplia – page 215. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 7-1