Accounts receivable is the amount payable by the customer to the company for the goods delivered and services provided. Accounts receivable is a current asset and it is any amount owed to the company by the customers for goods purchased on credit. Bills receivable and accounts receivable are almost similar in nature and they are used interchangeably but in fact refers to the amounts payable to a business entity under the transaction of bills of exchange in a business transaction. Mr. Mohammed Al Mammari is accounting manager of Dhofar Beverage Company, having different branches around Sultanate of Oman. Mr. Mohammed Al Mammari wishes to explain about accounts receivable accounting to his accounting executives and expects you to understand the following relating to accounts receivable and prepare necessary journal entries and accounting treatment for the year ended 31st December 2021. • The company sells goods on RO 150,000 for cash and RO 300,000 on credit basis to various customers in the company. The company has received RO 50000 towards credit sales and the rest is receivable according to the terms of the business transaction. • Later, the company has not received any money out of the rest of the credit sales and decided to estimate the bad and doubtful debts at 2.5% of the total credit sales. The company had allowance for bad and doubtful debts (credit balance) RO 3000. (a) Explain the concept of bad debts, allowance for doubtful debts and bills receivable (b) Prepare journal entries and show how it will appear in income statement and balance sheet.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounts receivable is the amount payable by the customer to the company for the goods delivered and services provided. Accounts receivable is a current asset and it is any amount owed to the company by the customers for goods purchased on credit. Bills receivable and accounts receivable are almost similar in nature and they are used interchangeably but in fact refers to the amounts payable to a business entity under the transaction of bills of exchange in a business transaction. Mr. Mohammed Al Mammari is accounting manager of Dhofar Beverage Company, having different branches around Sultanate of Oman. Mr. Mohammed Al Mammari wishes to explain about accounts receivable accounting to his accounting executives and expects you to understand the following relating to accounts receivable and prepare necessary journal entries and accounting treatment for the year ended 31st December 2021. • The company sells goods on RO 150,000 for cash and RO 300,000 on credit basis to various customers in the company. The company has received RO 50000 towards credit sales and the rest is receivable according to the terms of the business transaction. • Later, the company has not received any money out of the rest of the credit sales and decided to estimate the bad and doubtful debts at 2.5% of the total credit sales. The company had allowance for bad and doubtful debts (credit balance) RO 3000. (a) Explain the concept of bad debts, allowance for doubtful debts and bills receivable (b) Prepare journal entries and show how it will appear in income statement and balance sheet.

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