The following information is extracted from Shelton Corporation’s accounting records at the beginning of 2019: Accounts Receivable $67,000 Allowance for Doubtful Accounts 1,300 (credit) During 2019, sales on credit amounted to $582,000, $552,800 was collected on outstanding receivables and $2,600 of receivables were written off as uncollectible. On December 31, 2019, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance. What would be the bad debt expense and the formula to find it?
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.
| $67,000 | ||
| Allowance for Doubtful Accounts | 1,300 | (credit) |
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