Horus Company provided for doubtful accounts expense monthly at 3%of credit sales. The balance in the allowance for doubtful accounts was P1,000,000 on January 1 , 2019. During 2019, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made at 3% of credit sales, P200,000 accounts were written off, and recoveries of accounts previously written off amounted to P50,000. An aging of accounts receivable was made on December 31, 2019. 1 – 60 days 6,000,000 10% uncollectible 61 – 180 days 2,000,000 20% uncollectible 181 – 360 days 1,500,000 30% uncollectible More than one year 500,000 50% uncollectible Based on the review of the “more than one year” category, additional accounts of P100,000 are to be written off on December 31, 2019. What should be reported as doubtful accounts expense for the current year? a. P2,250,000 b. P1,650,000 c. P900,000 d. P850,000
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.
Horus Company provided for doubtful accounts expense monthly at 3%of credit sales. The balance in the allowance for doubtful accounts was P1,000,000 on January 1 , 2019.
During 2019, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made at 3% of credit sales, P200,000 accounts were written off, and recoveries of accounts previously written off amounted to P50,000.
An aging of
1 – 60 days 6,000,000 10% uncollectible
61 – 180 days 2,000,000 20% uncollectible
181 – 360 days 1,500,000 30% uncollectible
More than one year 500,000 50% uncollectible
Based on the review of the “more than one year” category, additional accounts of P100,000 are to be written off on December 31, 2019.
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