Oriental Company follows the procedure of debiting bad debt expense for 2% of all new sales. Sales for three consecutive years and year-end allowance account balances were as follows: Sales Allowance for Bad Debts 2018 3,000,000 40,000 2019 2,800,000 60,000 2020 3,500,000 80,000 What is the amount of accounts written off in 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.
Oriental Company follows the procedure of debiting bad debt expense for 2% of all new sales. Sales for three consecutive years and year-end allowance account balances were as follows:
| Sales | Allowance for |
|
| 2018 | 3,000,000 | 40,000 |
| 2019 | 2,800,000 | 60,000 |
| 2020 | 3,500,000 | 80,000 |
What is the amount of accounts written off in 2020?
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