An auditor learns that collections of accounts receivable during the last 10 days of December were not recorded. The effect will be to O a. O b. Leave both working capital and the current ratio unchanged at December 31. Overstate both working capital and the current ratio at December 31. Oc Overstate working capital with no effect on the current ratio at December 31, Od. Overstate the current ratio with no effect on working capital at December 31.
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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