E7-3. Grande Co. had credit sales of $20,000 in the current period. Accounts Receivable had a beginning balance of $4,000 and an ending balance of $5,000. Compute its cash collections from its credit sales for the current period and prepare journal entries for credit sales and cash collections. Beginning Balance Credit Sales Subtotal Ending Balance Trans. Credit Sales Accounts Receivable 4,000 20,000 24,000 Collections 5,000 Collections General Journal Debit Credit
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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.
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