Al Zain Company doing the business for sale of Electronics. The company made total sales of 10 Million in which Cash Sales were OMR 1 Million. As the Company make sales on credit to different customers it reports the following financial information before adjustments.Debit Balance of Account Receivable OMR 375,000. Credit Balance of Allowance for Doubtful Accounts OMR 22,500.Al Zain Company estimates bad debts at 3.5% of net sales and follows direct write off method to record the Journal entries. Based on the previous years’ experience Al Zain Company also estimated bad debts at 6.25% of account receivables as per the allowance method on credit sales. As Al Zain Company has not received the full amount it has written off the estimated amount of account receivables on 30 October. In the month of January the customers has paid the full amount which was written off by Al Zain Company. You are required to pass necessary Journal entries.
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 Zain Company doing the business for sale of Electronics. The company made total sales of 10 Million in which Cash Sales were OMR 1 Million. As the Company make sales on credit to different customers it reports the following financial information before adjustments.Debit Balance of
You are required to pass necessary Journal entries.
Step by step
Solved in 2 steps with 3 images
