elmuth maintains a provision for doubtful debts of 4% of ach financial year. s debtors owed N$2 800 on 30 June 2020 and N$4 000 o e provici
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.
![ASSIGNMENT-2021
Helmuth maintains a provision for doubtful debts of 4% of the total debtors at the ene
each financial year.
His debtors owed N$2 800 on 30 June 2020 and N$4 000 on 30 June 2021.
The provision for doubtful debts on 1 July 2019 was N$128.
REQUIRED
(b) Write up the provision for a doubtful debts account for the financial year ended June
2020 and June 2021.
Provision for a Doubtful Debts Account
[5]
(c) State and explain two accounting principles which Helmuth applied by maintaining a
provision for doubtful debts.
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