Before the adjusting entries are made at the end, Star Company's Accounts Receivable balance is P160,000 and Allowance for Doubtful Accounts has a debit balance of P1,600. An aging of accounts receivable results in P36,000 estimate of uncollectible. Using the aging of accounts receivable method, the bad debts expense for the year is:
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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