Agogo Trading has the following account balances as at 30 June 2019. RM Account Receivable 200,000 Provision for doubtful debt 6,000 On 30 June 2019, the following adjustment have to be made: Debts of RM500 are to be written off as bad One of the entities with accounts receivable whose debts had previously been written off as bad sent a cheque for RM1,000 in full settlement of the amount owed Provision for doubtful debts is 2% of the outstanding accounts receivables Required: For the year ending 30 June 2019 show the: a) Provision for doubtful debts account Statement of Profit or Loss (extract) Statement of Financial Position (extract)
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.
- Agogo Trading has the following account balances as at 30 June 2019.
|
|
RM |
|
Account Receivable |
200,000 |
|
Provision for doubtful debt |
6,000 |
On 30 June 2019, the following adjustment have to be made:
- Debts of RM500 are to be written off as bad
- One of the entities with
accounts receivable whose debts had previously been written off as bad sent a cheque for RM1,000 in full settlement of the amount owed
- Provision for doubtful debts is 2% of the outstanding accounts receivables
Required:
For the year ending 30 June 2019 show the: a) Provision for doubtful debts account
- Statement of Profit or Loss (extract)
Statement of Financial Position (extract)
- The following is a summary of account receivable and related accounts for three years for Tommy Enterprise the financial year ends 30 April each year.
|
Year ended 30 April |
Account receivable as at 30 April (before writing off bad debts) RM |
Bad debts written off RM |
Provision for doubtful debt |
|
2017 |
70,000 |
Nil |
2% |
|
2018 |
61,000 |
1,000 |
2% |
|
2019 |
83,000 |
3,000 |
2% |
For the year ending 30 April 2017, 2018, 2019, show the: a) Provision for doubtful debts account
- Statement of Profit or Loss (extract)
- Statement of Financial Position (extract)
Prepared by: Puan Siti Nor Junita Mohd Radzi
- The following is the
trial balance of Aroro Enterprise as at 31 August 2019
|
Particulars |
Debit (RM) |
Credit (RM) |
|
Capital |
|
48,400 |
|
Drawings |
3,500 |
|
|
Trade receivables |
9,000 |
|
|
Trade payables |
|
12,500 |
|
Sales |
|
40,400 |
|
Purchases |
31,000 |
|
|
Sales returns |
300 |
|
|
Purchases returns |
|
250 |
|
Wages and salaries |
5,600 |
|
|
Discounts allowed |
120 |
|
|
Discounts received |
|
200 |
|
Provision for doubtful debts |
|
300 |
|
Insurance |
700 |
|
|
Inventory as at 1 September 2018 |
2,400 |
|
|
Utilities |
950 |
|
|
Rates |
350 |
|
|
Premises |
10,000 |
|
|
Fixtures and fittings |
3,000 |
|
|
Motor van |
20,000 |
|
|
Cash in hand |
330 |
|
|
Cash at bank |
14,800 |
|
|
TOTAL |
102,050 |
102,050 |
Additional information as at 31 August 2019:
- Inventory as at 31 August 2019 amounted RM3,300
- An entity from whom there is accounts receivables of RM200 was unable to settle his debt and this amount is to be written off as bad debts.
- The provision for doubtful debts is 1% of the outstanding trade receivables. iv. The owner took RM100 worth of goods from the business for his own use
Required:
- Statement of Profit or Loss and Others Comprehensive Income for the year Ended 31 August 2019.
- Statement of Financial Position as at 31 August 2019.
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