At 1 January 20X4, Tartar Co had total receivables of $380,000. A specific allowance of $20,000 had been made for a business customer, Drab. The general allowance for receivables was 2.5%. During the year, Drab went out of business owing Tartar Co $28,000, none of which is expected to be recovered. At 31 December 20X4, Tatar had total receivables of $420,000. There were no specific allowances but the general allowance for receivables was increased to 3%. What is the charge in the statement of profit or loss for the year to 31 December for the allowance for receivables and irrecoverable debts?
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.
At 1 January 20X4, Tartar Co had total receivables of $380,000. A specific allowance of $20,000 had
been made for a business customer, Drab. The general allowance for receivables was 2.5%. During the
year, Drab went out of business owing Tartar Co $28,000, none of which is expected to be recovered.
At 31 December 20X4, Tatar had total receivables of $420,000. There were no specific allowances but
the general allowance for receivables was increased to 3%.
What is the charge in the statement of profit or loss for the year to 31 December for the allowance for
receivables and irrecoverable debts?
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