39.Sara Company sold merchandise on credit with a list price of P105,000 and a trade discount of 10%. Terms were 2/10, n/30. The company uses the net price method. At the end of the year, the account is still outstanding and the discount period has already lapsed. What is the required adjusting entry at year end in order to report the accounts receivable at its net realizable value? a. Dr. Accounts Receivable, 1,890; Cr. Sales Discounts, 1,890 b. Dr. Accounts Receivable, 1,890; Cr. Sales Discounts Forfeited, 1,890 c. Dr. Accounts Receivable, 2,100; Cr. Sales Discounts Forfeited, 2,100
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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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