ABC Group has been in business for 5 years. The unadjusted trial balance at the end of the current year shows Accounts Receivable P30,000, Sales Revenue P180,000, and Allowance for Doubtful Accounts with a debit balance of P2,000, ABC estimates bad debts to be 10% of accounts receivable. It was also identified that the amount of P1,500 can no longer be collected to Customer A. Requirement: 1. Prepare the entries necessary to adjust Allowance for Doubtful Accounts using the two methods. 2. What is the new balance for Allowance for Doubtful Accounts for the following methods: a. Allowance method b. Direct Write-Off Method
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.
ABC Group has been in business for 5 years. The
unadjusted
year shows
Revenue P180,000, and Allowance for Doubtful
Accounts with a debit balance of P2,000, ABC
estimates
receivable. It was also identified that the amount of
P1,500 can no longer be collected to Customer A.
Requirement:
1. Prepare the entries necessary to adjust
Allowance for Doubtful Accounts using the two
methods.
2. What is the new balance for Allowance for
Doubtful Accounts for the following methods:
a. Allowance method
b. Direct Write-Off Method
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