Admas University

Misrak TVET College

Monitor and control accounts receivable

Accounting Level- III

Learning Guide #1
Unit of Competence: Monitor and control accounts receivable
Module Title: Monitor and control accounts receivable
LG Code: EIS ACB3 09 0812
TTLM Code: EIS ACB3 09 0812
LO1: Collect and record monies due
LO2: Review compliance with terms and conditions
LO3: Resolve disputed amounts within predetermined parameters

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Unit Descriptor
Unit This unit describes the performance outcomes, skills and knowledge required to
descriptor determine the nature and extent of account deficits and to reach a decision on payment
methods and appropriate monitoring and controlling of accounts.

This unit may apply to job roles subject to licensing, legislative, regulatory or
certification requirements so Commonwealth, State or Territory requirements should be
confirmed with the relevant body.

Application of the Unit

Application of the unit The unit may be applied within organisations of various sizes and
across a range of customer bases.

Licensing/Regulatory Information
Not applicable.

Pre-Requisites
Prerequisite
units

Employability Skills Information

Employability This unit contains employability skills.
skills

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Occupational Standard: Accounts and Budget Support Level III
Unit Title Monitor and Control Accounts Receivable
Unit Code EIS ACB3 09 0812
Unit Descriptor This unit describes the performance outcomes, skills and
knowledge required to determine the nature and extent of
account deficits and to reach a decision on payment methods
and appropriate monitoring and controlling of accounts.

Elements Performance Criteria

1. Collect and 1.1 Status of debt is determined in accordance with organization
record monies policy and guidelines and legislative requirements
due
1.2 Transactions on account are accurately recorded and
maintained according to organization policy and guidelines
1.3 Records of customer contact are accurately maintained
2. Review 2.1 Customers in breach of terms and conditions are correctly
compliance with identified and contacted promptly and courteously to bring
terms and
account within terms
conditions
3. Resolve 3.1 Background to claim is thoroughly researched based on
disputed client's outline of dispute
amounts within
predetermined 3.2 Records are thoroughly checked for verification of all case
parameters material
3.3 Type of claim is correctly identified and resolved in
accordance with organization policy and procedures

Variable Range
Organisation policy  accepting and rejecting credit applications
and guidelines may  applying customer payments to appropriate accounts
cover:  assistance to customers on billing and collection problems
 collecting monies due
 gathering information and its evaluation
 legal obligations
 liaison and information dissemination to internal and external
parties
 maintenance of customer account files
 maintenance of security of invoice and other appropriate files

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  making billing adjustments to customer accounts
 overall organisation goals and objectives
 reviewing and adjusting credit limits for established customers
 setting credit limits or credit lines for applications
 development and informal training of credit staff
 suspension of credit facilities
 trading terms and credit limits
Legislative  Commercial code with regard to:
requirements may  Bankruptcy and liquidation
include:  Bills of Sales and Other Instruments
 Cheques and Payment Orders
 contract
 Corporations
 Partnership
 Personal Property Securities laws
 Trade Practices and consumer protection proclamation.
Records may  agency file systems
include:  audit records
 law enforcement and prosecution agencies
 past investigations
 records of customer contact that are electronic or paper-
based
 standards setting organization
 telephone logs
Contact with  will primarily involve telephone communication
customers:

Evidence Guide
Critical aspects of Assessment requires evidence that the candidate:
Competence  interpret and comply with appropriate legislation
 know and implement organisation credit policy
 liaise with others to clarify information for basic credit
accounts
 achieve positive outcomes
 use data entry and recording systems and credit policies
Underpinning Demonstrates knowledge of:
Knowledge and  credit management business protocols and process
Attitudes  organizational policy, procedures and systems
 the credit management sector and related legislation

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Underpinning Skills Demonstrate:
 communication skills to:
 determine and confirm debt status, using questioning and
active listening as required
 liaise with others, share information, listen and understand
 use language and concepts appropriate to cultural
differences
 numeracy and IT skills to:
 perform credit related calculations
 access and update account records electronically
 access web-based information services
 literacy skills to read and interpret documentation from a
variety of sources and record and consolidate debt related
information
 research and analysis for accessing, interpreting and
managing trading terms and status information and to check
claims
 interpersonal skills to deal effectively with customers on
outstanding repayment matters and to liaise with legal
practitioners as required
 judgement skills for making credit related decisions
 organizational skills, including the ability to plan and sequence
work
Resources Access is required to real or appropriately simulated situations,
Implication including work areas, materials and equipment, and to
information on workplace practices and OHS practices.
Assessment Competency may be assessed through:
Methods  Interview / Written Test / Oral Questioning
 Observation / Demonstration
Context of Competency may be assessed in the work place or in a
Assessment simulated work place setting.

Lo1. Collect and record monies due

The task of successfully collecting accounts receivable is no easy feat. From monitoring account
balances and following up on delinquent payments to providing quality customer service and
making decisions that can make or break your organization, you clearly have a job that is both
unique and complex. Are you consistently on top of your customers and clients or could you
benefit from a few process improvements that get your accounts receivable on track and in
order? Our accounts receivable training can help!

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Accounts Receivable (A/R) is one of a series of accounting transactions dealing with the billing
of a customer for goods and services he or she has ordered. Whether you are part of a start-up
organization or have been billing customers and clients for years, it's imperative that collecting
accounts receivable is a top priority. Businesses that can successfully monitor and collect A/R
can ensure their organizations run smoothly and generate income. However, collecting accounts
receivable can be even more difficult and stressful given the challenging economic times.

You're probably familiar with some of the struggles A/R professionals face. Whether you're
trying to stay on top of countless accounts, dealing with angry or defensive customers or sending
collections and follow-up letters, the task of monitoring A/R and asking people for money is
never easy. That's why we've created this power-packed one-hour program — to provide you
with invaluable tips, techniques and how-to's for combating common A/R challenges and
simplifying the task of getting the money your organization is owed.

Are you confident that you can do all of the following?

 Eliminate "stray" receivables buried in your mounds of accounts

 Identify customer credit periods resulting in abnormally high A/R, which lead to bad debt
 Understand A/R's relation to top line sales and the "lagging behind" effect of cash flow
 Implement ways to overcome debtors' excuses and complaints
 Recognize how accounts receivable management directly impacts your organization's
bottom line
 Minimize the stress and frustration caused from dealing with difficult customers
 Address the challenges of your position head-on with proven tips and strategies

If you're unsure of how to accomplish any of the items listed above, you're not alone! Accounts
Receivable can be one of your organization's most valuable assets if managed properly. With the
tips, techniques and knowledge provided in this powerful webinar, you'll receive a simplified set
of instructions that will help you learn how to monitor and collect accounts receivable in a way
that improves your organization's bottom line and minimizes your difficulties in the process.
Discover the keys to successfully getting a handle on your accounts, putting a system in place
that lets you easily identify next steps for customers and turning customers into allies for getting

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the money owed to your business. In this workshop, you'll improve your organization's overall
financial health — and maintain a positive attitude in the process.

The Monitoring and Collecting Accounts Receivable course will teach you the advantages
of managing, monitoring and maintaining an accounts receivable system that yields real
returns for your business.

Don't spend another day struggling to collect monies owed to your organization and stay on top
of all your accounts receivable. Gain the knowledge and insight into what it takes to successfully
manage accounts receivable; this class will pay for itself many times over given the positive
impact on your organization's financial well-being!

What You'll Learn

 Define Accounts Receivable as it relates to the rest of the balance sheet

 Understand the relationship between A/R, cash flow and profits
 Discover the importance of monitoring A/R throughout your accounting period
 Segment out accounts that are current, slightly past due or seriously past due
 Develop "Payment Profiles" to highlight customers who are consistently late in payment
 Identify customers who pay quickly to take advantage of prompt payment discounts
 Explore ways to use your follow-up with overdue customers to your advantage
 Build rapport with even the most difficult customers to get them on your side
 Implement strategies that ensure your organization's method for determining bad debts is
consistent

Who Will Benefit

This information-packed program is essential for business owners, as well as individuals tasked
with monitoring and collecting accounts receivable within an accounting department — in
organizations of all sizes!

1.2.Accounts Receivable Controls

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Controls over accounts receivable really begin with the initial creation of a customer invoice,
since you must minimize several issues during the creation of accounts receivable before you can
have a comprehensive set of controls over this key asset. Controls then span the proper
maintenance of accounts receivable, and their elimination through either payments from
customers or the generation of credit memos. The key controls to consider are:

 Require credit approval prior to shipment. You will have problems collecting accounts
receivable if an order is shipped to a customer with a bad credit rating. Therefore, require
the signed approval of the credit department on all sales orders over a certain dollar
amount.
 Verify contract terms. If there are unusual payment terms, verify them before creating an
invoice. Otherwise, accounts receivable will contain invoices that customers refuse to
pay.
 Proofread invoices. If an invoice for a large-dollar amount contains an error, the
customer may hold up payment until you send a revised invoice. Consider requiring the
proofreading of larger invoices to mitigate this problem.
 Authorize credit memos. People who have access to incoming customer payments could
intercept incoming cash and then create a credit memo to cover their tracks. One step in
the prevention of this problem is to require the formal approval of a manager for credit
memos, which are then verified at a later date by the internal audit staff. Do not take this
control to extremes and require approval for extremely small credit memos - allow the
accounting staff to create small ones without approval, just to clean up small remaining
account balances.
 Restrict access to the billing software. As just noted, someone could intercept incoming
payments from customers and hide the theft with a credit memo. You should password-
protect access to the billing software to prevent the illicit generation of credit memos.
 Segregate duties. As just noted, no one should be able to handle incoming customer
payments and create credit memos, or else they will be able to take the money and cover
their tracks with credit memos. Therefore, assign these tasks to different people.
 Review accounts receivable journal entries. Accounts receivable transactions almost
always go through a sales journal in the accounting software that generates its own

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 accounting entries. Therefore, there should almost never be a manual journal entry in the
accounts receivable account. You should investigate these entries carefully.
 Audit invoice packets. After invoices are completed, there should be a packet on file that
contains the sales order, credit authorization, bill of lading, and an invoice copy. The
internal audit staff should review a selection of these packets to verify that the billing
clerk properly reviewed all of the supporting paperwork and correctly generated an
invoice.
 Match billings to shipping log. It is possible that items will be shipped without a
corresponding invoice, or vice versa. To detect these situations, have the internal audit
staff compare billings to the shipping log, and investigate any differences.
 Audit the application of cash receipts. The accounting staff may incorrectly apply cash
receipts to open invoices, perhaps not even applying them to the accounts of the correct
customers. Have the internal audit staff periodically trace a selection of cash receipts to
customer invoices to verify proper cash application.

These items constitute the basic accounts receivable controls. A company with a specialized
receivables system may need to implement additional controls, or may not need some of the
items listed here.

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2. Introduction
The term receivable includes all money claims against people, organization, or other debtors.
Receivables are acquired by a business enterprise in various kinds of transaction; the most
common is from the sale of merchandise or service on credit bases. They are mostly classified as
account receivable and notes receivable.
Account Receivable is an amount owed by customers on account. It results from credit sale of
goods and services and it is generally expected to be collected within 30 to 60 days.
Notes Receivable represents claims that are evidenced by formal instrument of credit. The credit
instrument formally requires the debtor to pay interest extends from the period of 60 days to one
year.

For many businesses, the revenue from sales on credit basis is the largest factor influencing the
amount of net income. As credit is granted, businesses must account for the resulting receivables,
which may represent a substantial portion of the total current assets. On the other hand, there is
the probability that the businesses will be unable to collect some of the amounts owed by credit
customers. Whenever there are credit transactions, some people fail to pay their obligations.
Such losses will occur inevitably, and they must be considered as an expense of doing business
on credit. In addition, it is essential that managers keep informed about these losses from
uncollectible receivables. This enables them to determine the effectiveness of the credit policies
(or procedures) used by their firm, especially with regard to profitability.

Managers must also be alert to the possibility of investing idle funds for short periods in order to
earn income until the money is required in business operations. If the amount of cash on hand
exceeds immediate cash requirements, the excess cash has to be invested in securities until
needed. Managers must keep a close watch over investments in securities by appraising any
changes in market conditions.

Accounting for Notes Receivables

A promissory note is an unconditional promise to pay a definite sum of money on demand or at a
future date. The one who signs the note is called the maker. The entity to which payment is to be
made is called the payee. The payee regards all promissory notes it holds and that are due in less

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than one year as notes receivable in the current assets section of the balance sheet. The makers
regard them as notes payable in the current liability section of the balance sheet.
Many companies accept notes receivable in settlement of past-due accounts. Notes produce
interest income and represent a stronger legal claim than do accounts receivable. Selling or
discounting notes is a common financing method. Note Receivables are frequently accepted from
customer who needs to extend the credit period of outstanding account receivable .It is also
accepted from high risky customer.

Note is a written promise to pay a sum of money on demand or at a definite time. A note
receivable is usually interest bearing (earns of interest for the period between the issuance date
and the due date). However, if the parties prefer it in that way, it can also be non-interest bearing.
A note may serve as the basis for granting credit in certain sales transactions. The buyer’s written
promise gives the seller assurance of collection than a regular account. The note applies moral
pressure on the buyer and gives legal protection to the seller. The seller may also earn interest in
return for granting credit.
A firm may accept a note receivable from a customer at the time of a sale or while extending
credit on a past-due account receivable.

Several terms are important in accounting for promissory notes.

1. Maturity date. The date on which the note must be paid.
2. Duration of note. The length of time in days between a promissory note’s issue date and its
maturity date.
3. Interest and interest rate. The cost of borrowing money or the return for lending money.
4. Maturity value. The total proceeds at the maturity date.

The procedures for handling notes receivable can be understood from the following example.

Non- Interest Bearing Notes Receivable

If the note is non- interest bearing the face value as well as the maturity value of the note are
equal.
Example:

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The account receivable from Dell enterprise, which has a balance of Br 10,000, is past due. A
90 days non-interest-bearing note for the amount was accepted in settlement of the account on
May 16, 2000.
The entry to record the transaction is as follows:
May 16. Notes receivable…………. Br10, 000
Account receivable……………10,000

On the maturity date the face value of the note, Br 10,000 is collected and recorded as follows:
Aug 14. Cash ………….10, 000
Notes receivable………..10,000
The maturity date (the date on which the note is collected), for the above note is computed as
follows:
Total credit period…………………………………....90 days
Days in May after the notes is accepted 31-16…... 15
75
Days in June…………………………………………. 30
45
Days in July………………………………………….. 31
Maturity day (August)…………………………….......14

Interest bearing note receivables

If the note is the one that bears or earns interest, it is said to be interest-bearing note. Assume
that WX Company accepted a 60-day, 8% note of 6000 from JR Company in settlement of the
past due account receivable on October 21, 2000.

Oct 21. Notes receivable ……………..6000

Account receivable……………..6000
Dec20 cash………………6080
Interest income ………80
Notes receivable……6000
Interest = Principal x Interest Rate x Time in years

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 Interest = (6000 x8%X60/360) = Br80
Discounting Note Receivable
One of the advantages of a note receivable over an account receivable is that, the holder of the
note can discount it at a bank. Selling or discounting notes is a common financing method .That
is, when a firm is in need of cash, it may transfer its notes receivable to a bank by endorsement.
The bank takes the note and charges interest at a specified rate. The discount (interest) charged
by the bank is computed on the maturity value of the note applying discount rate for the period
of time the bank holds the note, namely the number of days remaining until maturity (the
difference between the date of the transfer and the due date of the note). The bank deducts the
discount in advance and the endorser receives the “net proceeds” (the maturity value less the
discount charge) or the excess of the maturity value of the note over the discount.
Example:
Assume that the Kate Company accepted 60 days, 7% note of Br 600 dated April 17 from
Warrior company in settlement of the past due account. On May 2, Kate Company has
discounted the note at Dashen bank at 8%. The maturity date of the note is June 16. On May 2,
the Kate Company decided to discount Warrior Company’s note at the bank at stated rate.
The discount and the proceeds on the note receivable are computed as follows:
Step 1, Maturity value.
Maturity value = principal (face value) + interest
60
The interest for 60 days at 7% ( x 0.07 x Br 600) = Br. 7.
360
Thus, the maturity value of the note = 600 + 7 =607
Step 2. Determine the number of days in the discount period (the number of days from the
discount date to maturity date). This number can be computed by working back ward
from the maturity date to the discount date.
Maturity date……………………………. …............June 16
Discounting date …………………………………….May 2
Number of days from discount date to maturity date…..45 days.
Step 3. Determining the bank discount.
Bank discount is computed by Maturity value X Discount rate for the number of days
between discount day and maturity day (45 days)

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 Discount = Maturity Value X Discount Rate X Discount Period
Discount = Br 607 x 0.08 x 45/360
Discount = Br 6.07
Step 4 Determine the proceeds
The amount of proceed to be received from the bank is the difference between maturity value
of the note and bank discount, i.e.
Br 607 – Br 6.07 = Br 600.93
The discounting of the note receivable is recorded in the books of the Kate Company as
follows:
April 17. Notes receivable…......600
Account receivable….....600

May 2. Cash …………..600.93

Notes receivable…………………600
Interest Income…………….…....0.93
Note that, if the proceed received is greater than the face value of the note, the difference is
credited to interest income .Likewise if the proceed received is less than the face value of the
note the difference is debited to interest expense.
Dishonored Notes Receivable
If the maker of the note fails to pay the debt on the maturity date, the note is said to be
‘’dishonored.’’ It represents a note that is not collected on maturity date. A dishonored note
receivable is no longer negotiable, and the amount of the claim, including interest due against the
customer (maker) is transferred to an Accounts Receivable account.
If Warrior Company dishonors the note at maturity date, the Kate Company must pay the
maturity value (the face amount of the note plus the interest) to the bank. The firm charges the
entire amount to the Accounts Receivable account.
The entry to record the payment to the bank will be as follows:

June 16. Account Receivable ………607

Cash…………………… 607
Later when dishonored note is collected:

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 Cash………………………607
Account receivable…........607

Accounting for Uncollectible Account Receivables

Once receivables are recorded in the accounts, the next question is, how these receivables should
be reported on the balance sheet. Because, some receivables may be uncollectible. To ensure that
receivables are not overstated, they have to be valued at net realizable value.
The income statement also is affected by the amount of uncollectible receivables. An expense for
estimated uncollectible is recorded to make certain that expenses are not understated and are
matched with related revenue. This expense is reported as bad debt expense on the income
statement. Therefore, before receivables are presented on the balance sheet and net income is
computed, the accounts should be adjusted to reflect such losses. There are two methods of
accounting for uncollectible account receivable.
A. Direct write off
B. Allowance method

A) The Direct Write-Off

One procedure used by most small businesses is to wait until they make sure that the account of a
specific customer is definitely uncollectible to record the expense. The firm may carry the
account on its books until the account has definitely become uncollectible. Then, the direct
charge-off method recognizes the loss at the time the Account Receivable is determined to be
uncollectible. It Reduces Account Receivable and increases Uncollectible Accounts. The amount
to be charged-off as a loss is debited to an expense account called Bad Debts Expense, and
credited to the asset account Accounts Receivable of the customer.

Suppose that Rosa Company, a customer of the Style Clothing, has bankrupted before paying its
account balance of Br. 750 and the Style Clothing decided to write-off the account as a bad debt
as follows:
Sept. 16. Bad Debts Expense 750
Accounts Receivable 75

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Sometimes, an account written-off as uncollectible may be collected later in total or in part.
Under such cases, two entries are made. The first is to reinstate the amount written off and the
second is to record the collection.

Suppose that the account of Rosa Company has been collected in full after several months (on
November 10). Rosa Company’s account has already been written-off and the entry has to be
reversed. The cash received up on collection is recorded by debiting cash and crediting Account
Receivable.

To reverse (reinstate) the account receivable that was written off is:
Nov. 10. Account recievable 750
Bad Debts Expense 750
Then, the collection of the money is recorded in the usual manner as a debit to cash and a credit
to Accounts Receivables.
Nov. 10. Cash 750
Account Recievable – Rosa co. 750

B) The Allowance Method

Bad debt expenses are matched against the sales they produced. At the time of sale, management
cannot identify which customers will not pay. To follow the matching rule, losses from
uncollectible accounts must be estimated. The estimate becomes an expense in the fiscal year in
which the sales are made. Uncollectible Accounts Expense appears on the income statement as
an operating expense. Allowance for Uncollectible Accounts appears on the balance sheet as a
contra-asset account that is deducted from Accounts Receivable and reduces the accounts
receivable to the amount expected to be realized in cash.

Most large business enterprises put provisions for their receivables estimated to be uncollectible
in the future. This method permits the seller to match the estimated bad debt expenses against the
sales revenue from which the accounts receivable has resulted. Even though it is not known
which specific customers will not pay their account, it allows the accountant to report accounts
receivable on the balance sheet at the amount that is probably collectible, rather than at the gross

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amount. In order to record bad debt expense and match it with the sales revenue of the period,
the losses likely to result from the estimated uncollectible receivable. The advance provision for
future uncollectible receivable is made by an adjusting entry at the end of the fiscal period.

Suppose that the Accounts Receivable account of Style Clothing has a balance of Br 200,000 at
the end of the period. After certain analysis, it is estimated that a total of Br. 4,500 will not be
collectible. The amount expected to be realized from the accounts receivable is, therefore, Br.
195,500 (Br. 200,000 – Br. 4,500), and the Br. 4,500 reduction is the uncollectible expense
accounts for the period. The Br 4,500 reduction in accounts receivable cannot yet be identified
with specific customer accounts. Therefore, account receivable is not credited; instead, a contra
asset account called Allowance for doubtful account is used.
The entry to record this estimate in the journal is:
Dec 31. Bad Debts Expense 4,500
Allowance for Bad Debts 4,500

The effect of the debit part of the entry is to charge the estimated bad debt loss against the
revenue of the period. The credit part of the entry, the Allowance for Bad Debts accounts
reflects the estimated shrinkage is the asset accounts receivable. This account is called a
valuation account, because it literally revalues or reappraises the accounts receivable in the light
of reasonable expectations. It is shown on the balance sheet as a deduction from accounts
receivable (as illustrated below).
Style Clothing
Balance Sheet
December 31,19X2
Assets
Current Assets:
Cash Br. 125,000
Accounts Receivable Br.200, 000
Less: Allowance for Bad Debts 4,500 195,500

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Methods of Estimating Uncollectible Account
1. Percentage of Net Sales Method
This method asks the question, “How much of this year’s net sales will not be collected?” The
answer is the amount of uncollectible expense for the year. It is usually based on the company’s
historical background interns of default rate of accounts receivable collection. Allowance for
Uncollectible Accounts contains the accumulated amount from previous years.
For instance, the adjusting entry to record uncollectible accounts expense at 2% of Br600,000 net
sales will be:

Uncollectible Accounts Expense 12,000

Allowance for Uncollectible Accounts 12,000

2. Accounts Receivable Aging Method

When this method is used, the accountant asks the question, “how much of the year-end balance
of Account Receivable will not be collected?” The difference between the amount determined to
be uncollectible and the prior balance of the Allowance for Uncollectible Accounts is the
expense for the year. The aging of Account Receivable is the process of listing each customer’s
account according to the due date of the account. Assume that the more the account receivable is
past due, the less likely that it will be collected.
Example:
Computed balance for uncollectible accounts……………………. Br2, 459
Less: Credit balance in allowance for Uncollectible Accounts…….…..800
Uncollectible Accounts Expense for the period………………… Br1, 659

The adjusting entry to record the uncollectible account receivable estimated using the aging of
receivable method is:

Uncollectible Accounts Expense 1,659

Allowance for Uncollectible Accounts 1,659
Write-Off of the Allowance Account

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As we have just discussed, under the allowance method, Bad Debts Expense are debited and
Allowance for Bad Debt is credited for the estimated amount of uncollectible. Then, when a
particular customer’s account has been proved uncollectible, it is written- off. The amount owed
is debited to Allowance for Bad Debt account and the offsetting credit goes to the Accounts
Receivable account of the specific customer in the ledger. Suppose that the Style Clothing
determines that the account of Roman shop with a balance of Br. 600 is uncollectible. The
accountant writes-off the account by making the following journal entry:
March 10. Allowance for Bad Debts 600
Accounts Receivable/Roman Abebe 600

Notice that when bad debt expenses are provided for in advance, the write-off of a particular
uncollectible account does not involve an entry in the Bad Debts Expense account. The expense
has already been recorded by means of the adjustment for estimated bad debt expenses made at
the end of the period in which the sale took place.
Collecting an Account that was Written-Off
Like the direct write-off method, when a firm uses the allowance method to provide for bad
debts, the recovery of an account previously charged-off as uncollectible also requires an entry to
reverse the entry made at the time of the write-off and to record collection. For example, the
recovery of Br. 600 balance owed by Roman shop is recorded in general journal form as shown
below. Notice that Account Receivable account is debited and Allowance for Bad Debt account
is credited to reinstate the entry.
June 8. Account recievable – Roman shop................ 600
Allowance for Bad Debt ………………………..600

To record the collection of the account receivable:

June 8. Cash……………………….. 600
Account Receivable- Roman shop ………..600

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