The credit manager of Shell Fuel has gathered the following information about the company’saccounts receivable and credit losses during the current year: Dr Cr Net credit sales for the year Rs 800,000 Accounts receivable at year-end 175,000 Uncollectible accounts receivable: Actually written off during the year Rs 96000 Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule) 84000 180,000 Prepare journal entry summarizing the recognition of uncollectible accounts expense for theentire year under each of the following independent assumptions: Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance forDoubtful Accounts to the amount indicated in the year-end aging schedule. The balance in theallowance account at the beginning of the current year was Rs 25,000. (Consider the effect ofthe write-offs during the year on the balance in the Allowance for Doubtful Accounts.) c. The company uses the direct write-off method of accounting for uncollectible accounts
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.
The credit manager of Shell Fuel has gathered the following information about the company’saccounts receivable and credit losses during the current year:
|
|
Dr Cr |
|
Net credit sales for the year |
Rs 800,000 |
|
Accounts receivable at year-end |
175,000 |
|
Uncollectible accounts receivable: Actually written off during the year |
Rs 96000 |
|
Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule) |
84000 180,000 |
Prepare
- Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales.
- Uncollectible accounts expense is recognized by adjusting the balance in the Allowance forDoubtful Accounts to the amount indicated in the year-end aging schedule. The balance in theallowance account at the beginning of the current year was Rs 25,000. (Consider the effect ofthe write-offs during the year on the balance in the Allowance for Doubtful Accounts.)
c. The company uses the direct write-off method of accounting for uncollectible accounts
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
