Following balances are given in the Trial Balance: Dr($) Dr($) 1,00,000 20,000 1,200 20,500 Capital Drawings Bad Debts Sundry Debtors Provision for Doubtful Debts Salaries Outstanding Prepaid Insurance 2,000 1,000 200 Interest on Investment Account 500 Commission Received in Advance 400 Adjustments:(i) Further Bad Debts$500 (ii) Make Provision for Doubtful debts @5% on Sundry Debtors; (ii) Interest on Capital$ 10,000; (iv) Interest on Drawings $ 1,000. Show how the above balances and adjustments will appear in the Final Accounts:
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.
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