Question
Riverton Supplies uses the allowance method for uncollectible accounts. At January 1, 2025 the Allowance for Doubtful Accounts had a credit balance of $4,200. During 2025 the following events occurred.
| Date | Event |
|---|
| March 12 | The account of Delta Interiors, $1,900, was determined to be uncollectible and was written off. |
| June 8 | The account of Fairfield Ltd., $1,100, was determined to be uncollectible and was written off. |
| September 20 | Delta Interiors unexpectedly paid $600 of the amount previously written off. (Reinstate the receivable, then record the collection.) |
| December 31 | An aging of accounts receivable indicated that the Allowance for Doubtful Accounts should have a balance of $5,300. |
Instructions:
- Journalize the 2025 transactions, including the December 31 adjusting entry for bad debt expense.
- Post to the Allowance for Doubtful Accounts ledger account (running balance format), starting from the January 1 balance.
Statements in this challenge
- Journal EntriesJournal Entry
- Allowance for Doubtful AccountsLedger
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — accrual basis of accounting
Adjusting entries exist to move revenue and expense into the period they belong to, regardless of when cash moved. Every adjusting entry touches at least one income statement account and one balance sheet account — and never the cash account, because the cash has either already moved or has not moved yet.
Common mistakes
- Debiting or crediting Cash in an adjusting entry — a reliable sign the entry is wrong.
- Adjusting for the full amount of a prepayment rather than only the expired portion.
- Missing accrued items entirely because no document prompted them — accrued interest and accrued wages are the usual casualties.
Further readingThe 5 types of adjusting entry