I Like Accounting

Aging Method for Estimating Uncollectable Accounts

Lesson
Show/Hide Lesson

The problem with some other methods of estimating the likelihood of collecting accounts receivable is that it assumes every debt is just as collectable as every other.

That usually isn't true.

It turns out that the long a debt has gone unpaid, the more likely it will never be paid.

As a result, it makes sense to put more weight on older debts when calculating the estimated collectability of a given debt.

Question Jenny LLC, the ancient scissor designer, has produced the following aging table for its accounts receivable. The allowance for doubtful accounts currently has a debit of $3,000.00


Age (in Days)$ ReceivableEstimated % Uncollectable
0-60$41,000.007%
60-120$37,000.0019%
>120$20,000.0030%
What are the journal entries to record the estimation of credit sales that won't be paid?
Answer