The following information has been extracted from the books of accounts of Pabz, Inc. for the year-ended December 31, 2009: Net Sales for 20093,600,000 Total receipts from customers3,450,000 Collection of AR2,100,000 AR, Jan. 1, 2009750,000 Doubtful account expense (June 30, 2009)5,000 ADA, Jan 1, 200937,500 Additional information: 1.Doubtful accounts is based on 5% of AR balance at the end of the year. 2.Pabz sells its products on cash and credit terms. The amount of adjustment for doubtful accounts expense on December 31, 2009 should be:
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 following information has been extracted from the books of accounts of Pabz, Inc. for the year-ended December 31, 2009:
Net Sales for 20093,600,000 Total receipts from customers3,450,000 Collection of AR2,100,000 AR, Jan. 1, 2009750,000 Doubtful account expense (June 30, 2009)5,000 ADA, Jan 1, 200937,500
Additional information: 1.Doubtful accounts is based on 5% of AR balance at the end of the year. 2.Pabz sells its products on cash and credit terms.
The amount of adjustment for doubtful accounts expense on December 31, 2009 should be:
Step by step
Solved in 2 steps
