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Balance Sheet/Income Statement Questions
Asked Oct 21, 2006, 03:12 PM
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2 Answers My assignment includes writing up both a balance sheet and income statement given the trial balance. I've completed most of it, but I'm a bit unsure on a few things... 1) Allowance for Bad Debts. - Am I to consider this a current asset? 2) Patents. - Most likely long-term asset? Also, I'm aware write-offs of patents go on the income statement, but do patents themselves go on an income statement? 3) Bonds Paybable. - Typically long-term liability? 4) Regardless of where some of those accounts end up, my balance sheet still isn't equal on both sides. Which type of accounts do I subtract/less in a balance sheet? Allowance of bad debts? Treasury stock? Anything else? Thanks. |
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| 1. What I understood by allowance for bad debts is provision for bad debts.this is not a current asset rather this a current liability, but it is shown as deductions from the sundry debtors after providing for current year's bad debt. 2. Patents are not shown in income statement, rahter this are written off in the income statement each year. 3. Yes 4. Treasury stock are repurchased stocks by the company, shown as a deduction from equity in the liability side of the balance sheet. Alternativly you can go for rechecking the accounts in the ledger posting.or you can go for suspense a/c. | ||||
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| The thread is two years old. However, as long as we're at it, allowance for bad debt is not a liability. Bad debt is a receivable from a customer that is uncollectible. Since it is this company that is owed, how does this turn it into a liability, something the company would now owe to someone else? I.e. I owe you money and you decide you can't collect it. Does that mean you now owe someone else for this amount? Huh? Allowance for bad debt is a contra asset account that offsets the balance of receivables for the estimated amount they think will be uncollectible, reducing the receivables down to their real value. If it can't be collected, it has no future value. | ||||
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