Healthy Spices Ltd has prepared a statement of profit or loss for the 12-month reporting period ended 30 June 2021 on a cash basis, showing a $64 800 profit. The cash-based statement shows the following. Additional information The accounts receivable and accounts payable balances at the start of the reporting period were $24 600 and $14 700 respectively. At the end of the reporting period, Fed X had accounts receivable of $31 800 and accounts payable of $29 640. The opening inventory was $48 000 and the closing inventory $57 000. An advertising invoice of $4440 had not been paid. The business has equipment that cost $60 600. It has a useful life of five years and an expected salvage value of $6600. The insurance expense represents the 12-month premium on a policy that was taken out on 30 April. Required Prepare an accrual-based statement of profit or loss for Healthy Spices Ltd for the year ended 30 June (you are advised to show any workings).
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.
Healthy Spices Ltd has prepared a statement of profit or loss for the 12-month reporting period ended 30 June 2021 on a cash basis, showing a $64 800 profit. The cash-based statement shows the following.
Additional information
-
The accounts receivable and accounts payable balances at the start of the reporting period were $24 600 and $14 700 respectively. At the end of the reporting period, Fed X had accounts receivable of $31 800 and accounts payable of $29 640.
-
The opening inventory was $48 000 and the closing inventory $57 000.
-
An advertising invoice of $4440 had not been paid.
-
The business has equipment that cost $60 600. It has a useful life of five
years and an expected salvage value of $6600.
-
The insurance expense represents the 12-month premium on a policy
that was taken out on 30 April.
Required
Prepare an accrual-based statement of profit or loss for Healthy Spices Ltd for the year ended 30 June (you are advised to show any workings).
Step by step
Solved in 3 steps
