conducting an audit and have obtained the following figures with respect to sales and accounts receivable: 2021 2020 Accounts receivable $ 3,760,000 $ 2,950,000 Allowance for doubtful accounts $ 217,000 $ 211,000 Sales $ 25,850,000 $ 23,700,000
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.
You are conducting an audit and have obtained the following figures with respect to sales and
2021 2020
Accounts receivable $ 3,760,000 $ 2,950,000
Allowance for doubtful accounts $ 217,000 $ 211,000
Sales $ 25,850,000 $ 23,700,000
Required:
What are the audit implications of these figures?
Identify key audit steps that you would perform for any of the above accounts.
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