3. Garfield Gifts (Bad and Doubtful Debts) Assume that at 30 June 2018: • Accounts Receivable balance is $343,630. • Balance of Allowance for Doubtful Debts is $4,200. • Bad Debts to be written off are $3,630 including GST. • Allowance for Doubtful Debts to be adjusted to 3% of Accounts Receivable. Required: (a) General Journal entries to record the Bad Debts and Allowance adjustment. (b) Extracts of Income Statement and Balance Sheet.
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.
assume that at 30 June 2018:
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