Journalize the following transactions in the accounts of Zippy Interiors Company, a restaurant supply company that uses the allowance method of accounting for uncollectible receivables: May 24. Sold merchandise on account to Old Town Cafe, $24,450. The cost of goods sold was $14,500. Sept. 30. Received $9,000 from Old Town Cafe and wrote off the remainder owed on the sale of May 24 as uncollectible. Dec. 7. Reinstated the account of Old Town Cafe that had been written off on September 30 and received $15,450 cash in full payment.
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.
Journalize the following transactions in the accounts of Zippy Interiors Company, a restaurant supply company that uses the allowance method of accounting for uncollectible receivables:
| May | 24. | Sold merchandise on account to Old Town Cafe, $24,450. The cost of goods sold was $14,500. |
| Sept. | 30. | Received $9,000 from Old Town Cafe and wrote off the remainder owed on the sale of May 24 as uncollectible. |
| Dec. | 7. | Reinstated the account of Old Town Cafe that had been written off on September 30 and received $15,450 cash in full payment. |
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