4. Banyana's Financial year ends on 30th June. She maintains a provision for doubtful debts at 5% of the trade receivables at the end of the year. Banyana provided the following information: P 2020 July 1 Balance on provision for doubtful debts 900 2021 June 30 Total trade receivables 20000 2022 June 30 Total trade receivables On 1 July 2020 the balance on the provision for doubtful debts account was P900. Write up the provision for doubtful debts account for each of the years ended 30th June 2021 and June 2022. Balance the account at the end of each year. 16000
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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