4. During the current year, DDD Company reported beginning allowance for doubtful accounts 150,000, sales 9,500,000, sales returns and allowances, 1,000,000, sales discount, 500,000, accounts written off, 300,000, and recovery of accounts written off, 50,000. It is estimated that 3% of net sales may prove uncollectible. a. What is the ending allowance for doubtful accounts? b. Assume that per aging of accounts receivable, the uncollectible account is 200,000. Is there any year end adjustment? If yes, how much will be the adjustment (Indicate if it is a debit or credit adjustment). If there will be no adjustment, just write NONE.
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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