The accounts receivable balance for Renue Spa at December 31, 2017, was $84,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $2,500. During 2018, $2,500 of accounts receivable were written off as uncollectible. In addition, Renue unexpectedly collected $190 of receivables that had been written off in a previous accounting period. Services provided on account during 2018 were $221,000, and cash collections from receivables were $223,028. Uncollectible accounts expense was estimated to be 1 percent of the sales on account for the period. 1) Balance of Allowance for Doubtful Accounts at December 31, 2018?
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.
The accounts receivable balance for Renue Spa at December 31, 2017, was $84,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $2,500. During 2018, $2,500 of accounts receivable were written off as uncollectible. In addition, Renue unexpectedly collected $190 of receivables that had been written off in a previous accounting period. Services provided on account during 2018 were $221,000, and cash collections from receivables were $223,028. Uncollectible accounts expense was estimated to be 1 percent of the sales on account for the period.
- 1) Balance of Allowance for Doubtful Accounts at December 31, 2018?
Allowance for Doubtful Accounts: This is a contra asset account to the Accounts Receivables account that reduces the asset balance, and report the net realizable accounts receivable value on the balance sheet. Allowance for Doubtful Accounts indicates the amount of receivables that are expected to remain uncollectible.
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