The following information pertains to the unadjusted balances for Simple Co. at the end of June. Accounts Receivable of $100,000 Allowance for Doubtful Accounts $1,500 credit Net Credit Sales $500,000 Cost of Goods Sold $300,000 Prepare the adjusting journal entry for bad debts. Simple Co. uses the percentage of accounts receivable / aging of accounts receivable method to estimate bad debts and estimates that 5% of ending accounts receivable will be uncollectible.
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 pertains to the unadjusted balances for Simple Co. at the end of June.
- Accounts Receivable of $100,000
- Allowance for Doubtful Accounts $1,500 credit
- Net Credit Sales $500,000
- Cost of Goods Sold $300,000
Prepare the
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