At 30 September, Zebra Mountain had Accounts Receivable of $28,000 and Allowance for Bad Debts of $1,000. During October, Zebra Mountain recorded: Sales of $180,000 ($160,000 on credit; $20,000 for cash) Collections on account, $130 000. Bad debt expense, estimated as 2% of credit sales Write-offs of bad debts, $ 1,200. Required: Journalise the above transactions during October. Calculate the balance of accounts receivable and allowance for doubtful debts at the end of October and show how both accounts would appear in the financial statements
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
At 30 September, Zebra Mountain had
- Sales of $180,000 ($160,000 on credit; $20,000 for cash)
- Collections on account, $130 000.
- Bad debt expense, estimated as 2% of credit sales
- Write-offs of bad debts, $ 1,200.
Required:
Journalise the above transactions during October.
Calculate the balance of accounts receivable and allowance for doubtful debts at the end of October and show how both accounts would appear in the financial statements
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