At May 31, the accounts receivable of Bestway Cement amounted in total to $705,600. The company uses the balance sheet approach to estimate bad debts and had prepared an aging schedule of accounts receivable at May 31, which indicates an expected loss of $18,468. You are to prepare as of May 31 the adjusting entry required under each of the following independent assumption.
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 May 31, the
- The allowance for doubtful accounts has a credit balance of $13,572.
- The allowance for doubtful accounts has a debit balance of $5,162.
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