Al Hajar Co. provides you the following account balances for the year ended on 31 December 2019. Sales Revenue OMR 100,000 Cr. Accounts Receivable OMR 25,000 Dr. Allowance for Doubtful accounts OMR 1000 Cr. Scenario 1 Bad debts are estimated based on the aging schedule given below Aging class Receivable Balance (OMR) Estimate % of uncollectible 0–30 days 15,000 10 31–60 days 5,000 15 61–90 days 3,500 20 Over 90 days 1,500 25 Actual bad debt - OMR 1,100 and amount recovered - OMR 800. Scenario 2 Estimated amount of bad debts - 12% of receivables, Actual bad debt - OMR 1,500 and amount recovered later on - OMR 900. Scenario 3 Estimated amount of bad debts - 3.5% of Sales, Actual bad debt - OMR 1,300 and amount recovered - OMR 1000. Required: For each scenario given above; a)Estimate the uncollectible amounts. b)Pass adjusting entry to record the estimated uncollectible. c)Pass all the journal entries for actual write off and recovery of written off accounts.
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.
Al Hajar Co. provides you the following account balances for the year ended on 31 December 2019.
Sales Revenue OMR 100,000 Cr.
Accounts Receivable OMR 25,000 Dr.
Allowance for Doubtful accounts OMR 1000 Cr.
Scenario 1
|
Aging class |
Receivable Balance (OMR) |
Estimate % of uncollectible |
|
0–30 days |
15,000 |
10 |
|
31–60 days |
5,000 |
15 |
|
61–90 days |
3,500 |
20 |
|
Over 90 days |
1,500 |
25 |
Actual bad debt - OMR 1,100 and amount recovered - OMR 800.
Scenario 2
Estimated amount of bad debts - 12% of receivables, Actual bad debt - OMR 1,500 and amount recovered later on - OMR 900.
Scenario 3
Estimated amount of bad debts - 3.5% of Sales, Actual bad debt - OMR 1,300 and amount recovered - OMR 1000.
Required:
For each scenario given above;
a)Estimate the uncollectible amounts.
b)Pass
c)Pass all the
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