Anis supplies stationery to her customers on credit. Based on previous years’ trends, 2% of her accounts receivable will turn bad. To be prudent, she wants to record this potential loss in her books. Which of the following is the correct journal entry to record this estimate? Select one: a. Debit- Allowance for doubtful debts Credit- Accounts receivable b. Debit- Allowance for doubtful debts Credit- Statement of Profit or Loss and Other Comprehensive Income c. Debit- Statement of Profit or Loss and Other Comprehensive Income Credit- Allowance for doubtful debts d. Debit- Bad debt expense Credit- Accounts receivable
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.
Anis supplies stationery to her customers on credit. Based on previous years’ trends, 2% of her
Credit- Accounts receivable
Credit- Statement of Profit or Loss and Other Comprehensive Income
Credit- Allowance for doubtful debts
Credit- Accounts receivable
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