The Accounts Receivable balance for Gold, Inc. at December 31, 2017, was $24,000. During 2018, Gold earned revenue of $462,000 on account and collected $328,000 on account. Gold wrote off $5,700 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 2% of accounts receivable.
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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1.
|
Assume
Gold
had an unadjusted
$2,000
credit balance in Allowance for December
31,
2018.
Journalize
Gold's
December
31,
2018,
adjustment to record bad debts expense using the percent-of-receivables method. |
|
2.
|
Assume
Gold
had an unadjusted
$1,700
debit balance in Allowance for Bad Debts at
December
31,
2018.
Journalize
Gold's
December
31,
2018,
adjustment to record bad debts expense using the percent-of-receivables method. |
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