On December 31, 2019 Rossy & Co. Accounts receivable accounts showed a debit balance of Rs. 60000 and allowance for debt accounts a credit balance of Rs. 1400. On this date the company estimated bad debt at 7% of account receivable. Transactions during the year 2020 are summarized below: Sales during the year amounted to Rs. 340000. Worthless customers’ accounts written off Rs. 6900. Collections from customers amounted to Rs. 285000(including Rs. 3000 from Mr. Asif whose account has been written off in 2019. Sales discount allowed to customers Rs. 7500. The Ali & Co. paid Rs. 12000 applicable to its accounts totaling Rs. 14500. The Co. had gone out of business and no further collection was considered possible. An old machine costing Rs. 140000 was sold for Rs. 125000 to Zia & Co. exchange for cash Rs. 64000 and the balance on account. The company estimated probable loss at 15% on past due accounts receivable amounting Rs. 22000 and 2% on net yet due accounts receivable. Required: Give entries in General Journal form including adjusting entries for the year 2019 & 2020. Show allowance for bad debt account. Prepare partial balance sheet as on December 2019 & 2020.
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.
On December 31, 2019 Rossy & Co.
Transactions during the year 2020 are summarized below:
- Sales during the year amounted to Rs. 340000.
- Worthless customers’ accounts written off Rs. 6900.
- Collections from customers amounted to Rs. 285000(including Rs. 3000 from Mr. Asif whose account has been written off in 2019.
- Sales discount allowed to customers Rs. 7500.
- The Ali & Co. paid Rs. 12000 applicable to its accounts totaling Rs. 14500. The Co. had gone out of business and no further collection was considered possible.
- An old machine costing Rs. 140000 was sold for Rs. 125000 to Zia & Co. exchange for cash Rs. 64000 and the balance on account.
- The company estimated probable loss at 15% on past due accounts receivable amounting Rs. 22000 and 2% on net yet due accounts receivable.
Required:
- Give entries in General Journal form including
adjusting entries for the year 2019 & 2020. - Show allowance for bad debt account.
- Prepare partial balance sheet as on December 2019 & 2020.
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