The following balances have been taken from the unadjusted trial balance of a trading organization for the year ended Dec. 31, 2020: Sales (All on credit) Rs. 650,000 Sales Return and Allowance (All from credit sales) 20,000 Sales Discount 10,000 Accounts Receivable 430,000 Allowance for bad debt (Cr.) 2000 Required: Record and close bad debt expense for the year ended Dec. 31, 2020 under each of the following assumptions separately: a. Allowance for bad debt was estimated @ 10% of accounts receivable. b. Bad debt expense was estimated @ 1.5% of net credit sales.
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.
3. The following balances have been taken from the unadjusted trial
organization for the year ended Dec. 31, 2020:
Sales (All on credit) Rs. 650,000
Sales Return and Allowance (All from credit sales) 20,000
Sales Discount 10,000
Allowance for
Required:
Record and close bad debt expense for the year ended Dec. 31, 2020 under each of the following
assumptions separately:
a. Allowance for bad debt was estimated @ 10% of accounts receivable.
b. Bad debt expense was estimated @ 1.5% of net credit sales.
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