Interpreting Accounting Data The following table presents the net sales and the actual bad debts for five years For each of these years, calculate the percentage of bad debts in relation to sales Then project (or estimate) the percentage of sales that will become bad debts for Year 6. Year Net Sales Actual Bad Debts Bad Debts Percentage 1 $250 000 $2 000 400000 6 000 425 000 4 000 470 000 9 000 ? 450 000 8 000 Bad Debts 2345
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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