On January 1, 2020, Ocean Company's Allowance for Bad debts had a credit balance of P 120,000. During the year, the company wrote off P 205,000 of uncollectible Accounts Receivable, and unexpectedly recovered P 65,000 of bad debts written off in the prior year. Also at the end of this year, the company charged P 280,000 to bad debts expense. How much is the adjusted balance of Allowance for Bad Debts on Dec. 31, 2020? .
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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