11.4 At 30 September 20X2 Tester Co's allowance for receivables amounted to $38,000, which was equivalent to 5% of the receivables at that date. At 30 September 20X3 receivables totalled $868,500. It was decided to write off $28,500 of debts as irrecoverable. The allowance for receivables required was to be the equivalent of 5% of receivables. What should be the charge in the statement of profit or loss for the year ended 30 September 20OX3 for receivables expense? $4
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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