Bad Debt (000) 2009 2008 2007 Sales 37,500 30,000 23,000 Bad debt of sales 3% 2.75% 2.5% Estimated debt expense 1,125 825 575 Actual debt of sales 2.5% 2.5% 2.5% Actual debt expense 937.5 750 575 Difference 187.50 75.00 0.00 Products Returns (000) 2009 2008 Sales 37,500 30,000 Returns of sales 1% 1% Estimated returns 375 300 Actual return of sales 0.5% 0.5% Actual return 187.5 150 Difference 187.50 150.00 Warranties (000) 2009 2008 Sales 37,500 30,000 Warranties of sales 1% 1.00% Estimated debt expense 375 300 Actual warranties of sales 0.5% 0.5% Actual warranties expense 187.5 150 Difference 187.50 150.00 What are the journal entries to set up each reserve and then charge against that reserve?
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.
|
|
(000) |
||
|
|
2009 |
2008 |
2007 |
|
Sales |
37,500 |
30,000 |
23,000 |
|
Bad debt of sales |
3% |
2.75% |
2.5% |
|
Estimated debt expense |
1,125 |
825 |
575 |
|
Actual debt of sales |
2.5% |
2.5% |
2.5% |
|
Actual debt expense |
937.5 |
750 |
575 |
|
Difference |
187.50 |
75.00 |
0.00 |
|
Products Returns |
(000) |
|
|
|
2009 |
2008 |
|
Sales |
37,500 |
30,000 |
|
Returns of sales |
1% |
1% |
|
Estimated returns |
375 |
300 |
|
Actual return of sales |
0.5% |
0.5% |
|
Actual return |
187.5 |
150 |
|
Difference |
187.50 |
150.00 |
|
Warranties |
(000) |
|
|
|
2009 |
2008 |
|
Sales |
37,500 |
30,000 |
|
Warranties of sales |
1% |
1.00% |
|
Estimated debt expense |
375 |
300 |
|
Actual warranties of sales |
0.5% |
0.5% |
|
Actual warranties expense |
187.5 |
150 |
|
Difference |
187.50 |
150.00 |
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