In May business made credit sales for RO 521,000 and the collection from Accounts receivable were RO 522,500. Some of your receivable on whom RO 14000 was due on 14th May did not paid the amount but accepted a 45 days note at 8% interest. This was not recorded in the accounts.
In May business made credit sales for RO 521,000 and the collection from Accounts receivable were RO 522,500. Some of your receivable on whom RO 14000 was due on 14th May did not paid the amount but accepted a 45 days note at 8% interest. This was not recorded in the accounts.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Khimji Ramdas is a leading importer of food grains in Oman. Most of the sales of the business is on wholesale to different retailers across Oman. Mr Khimji the owner is in charge of imports. He finds that more than the sales, the Accounts receivable are increasing. Unhappy with the present accountant Mr Khimji appoints you on 1st April 2019 as a receivables manager to improve the cash collection from credit sales. He wants you to show him the actual position of his accounts receivables at the end of every month. You have collected details from the present accounts department relating to sales and receivables. The credit sales of March was RO 385,500 and Accounts receivables balance was RO 330,240.
In April you have started to work on getting the details of ageing receivables. Your find that the Store of one of our receivable Mr Taajir from salalah on whom RO 3000 has been destroyed due to Gonu in Salalah. This amount appears to be uncollectable. On discussion with Mr Khimji it was decided to treat the same as bad Debt in the accounts. During the month of April, the business made credit sales for RO 503,000 and the collections made from receivables were RO 492,250.
In May business made credit sales for RO 521,000 and the collection from Accounts receivable were RO 522,500. Some of your receivable on whom RO 14000 was due on 14th May did not paid the amount but accepted a 45 days note at 8% interest. This was not recorded in the accounts. From this month, you have decided to follow the allowance method for recording uncollectable for doubtful debts. You decided to make allowance @ 5% on closing Accounts receivable. In the month of June on the due date the notes receivable for RO 8000 was honoured. The others was dishonoured.
You are required to record the required Journal entries for the above transactions
**note: Working notes form part of the answer
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