The company provides for an allowance for bad debts equivalent to 3% of total receivables. Receivables balance is P2,000,000. The allowance for bad debts has a balance of P45,000 and P50,000 at the start and end of the year, respectively. P30,000 of previous accounts were actually found to be worthless and were written off. What is the deduction for bad debts for taxation purposes? * O 15,000 O 25,000 30,000 35,000
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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