Suppose at the end of the year before any adjusting entries, a company has a balance in Allowance for Uncollectible Accounts of $5,000 (debit). During the year, the company reported the following amounts: Credit sales to customers = $550,000 Cash collections from customers = $540,000 Actual bad debts = $20,000 What was the balance of Allowance for Uncollectible Accounts at the beginning of the year?
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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