Global Advertising handles ads and promotion of various clients all on credit term of 180 days. It’s unadjusted trial balance on Dec 31, 2004, end of it’s first year of operation, showed among others: Accounts Receivable, P1,250,000and Professional Fee, P4,560,000, As it was only its first year, management decided to forego recording of Bad Debts. Among its Transactions for the year 2005 are as follows Professional Service Rendered, P5,500,000 Total collection of Previous and current Accounts, P3,500,000 The accountant adopted a policy of providing for bad debts based on 3% of the outstanding accounts receivables at the end of the year. Prepare the following Entries to record the transactions for the year 2005 Post to T-Accounts the entries made in requirement a. Entry to adjust for bad debts on Dec 31, 2005 Post the adjusting entry made. What was the realizable value of the account receivable? How much was the bad debt expense in the income statement
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.
US GAAP BASED PLEASE
1. Global Advertising handles ads and promotion of various clients all on credit term of 180 days. It’s unadjusted
-
- Professional Service Rendered, P5,500,000
- Total collection of Previous and current Accounts, P3,500,000
The accountant adopted a policy of providing for bad debts based on 3% of the outstanding accounts receivables at the end of the year. Prepare the following
- Entries to record the transactions for the year 2005
- Post to T-Accounts the entries made in requirement a.
Entry to adjust for bad debts on Dec 31, 2005Post the adjusting entry made. What was the realizable value of the account receivable?- How much was the bad debt expense in the income statement
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