At January 1, 2023, the credit balance of Ayayai Corp's Allowance for Expected Credit Losses was $408,500. During 2023, the loss om impairment entry was based on a percentage of net credit sales. Net sales for 2023 were $79 million, of which 89% were on account. Based on the information available at the time, the 2023 loss on impairment was estimated to be 0.80% of net credit sales. During 2023, uncollectible receivables amounting to $486,000 were written off against the allowance for expected credit losses. The company has estimated that at December 31, 2023, based on a review of the aged accounts receivable, the allowance for expected credit losses would be properly measured at $534,500.

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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.