Ben karaibu commenced business on 1st January 2005 and his financial year closes on 31 December. For the year ended 31 December 2005, bad debts written off amounted to sh. 56,000 and a provision for doubtful debts of sh 104,000 was found necessary. In the year ended 31 December 2006:
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.
Ben karaibu commenced business on 1st January 2005 and his financial year closes on 31 December. For the year ended 31 December 2005,
1. bad debts written off amounted to sh 88,000
2. John Njoroge, whose debt amounting to sh. 8400 was among those written off in 2005, settled his debt
3. total debts outstanding as at 31 December 2006 stood at sh. 3,680,000
4. it was decided to provide for doubtful debts at 5% of outstanding total debts In the year ended 31 December 2007:
1. Bad debt amounting to sh. 152,000 were written off
2. A recovery of sh 12,800 was made in respect of debts written off in 2006
3. As at 31 December 2007, total debts outstanding stood at sh 2,880,000
4. The provision for doubtful debts was raised to 6% of the outstanding total debts.
Required:
a. Bad debts written off account for each of the year ended 31st Dec 2005, 2006 & 2007
b. Bad debts recovered account for each of the years ended 31st Dec 2005, 2006, 2007
c. Provision for doubtful debts account for each of the years ended 31st Dec 2005,2006 & 2007
d. Extracts from the
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