On December 31, 2017, when its accounts receivable were $270,000 and its account Allowance for Doubtful Accounts had an unadjusted debit balance of $1,800, H55 Corp. estimated that $15,100 of its accounts receivable would become uncollectible, and it recorded the bad debts adjusting entry. On May 11, 2018, H55 determined that Fei Ya Cheng's account was uncollectible and wrote off $1,700. On November 12, 2018, Cheng paid the amount previously written off.
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.
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