FINANCIAL ACCOUNTING, Class Exercises ACCOUNTS RECEIVABLE Exercise: A) The management of Red Company decided for an allowance (impairment) of 10% of accounts receivable for risky (uncollectible) accounts on 31 March. The total of Accounts Receivable was TL500.000. B) Customer X informed about its bankruptcy on 27 May and it will not be able to pay its debt of TL10.000 to Red Company. C) Customer X agreed to pay its debt totaling TL 10.000 on 15 June. It paid TL 7.500 on 22 June and the remaining will be paid in 10 days. Required: Record the related journal entries for the Red Company.
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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