idiyah Co. estimates that RO 6,500 of its accounts receivable to be uncollectible. If Allowance for Doubtful Accounts has a RO 200 debit balance, the company should record a elect one: O a. None of the answers are correct O b. debit to Bad Debt Expense for RO 5,300. O c credit to Allowance for Doubtful Accounts for RO 6,500. O d. debit to Allowance for Doubtful Accounts for RO 5,300. O e. credit to Bad Debt Expense for RO 7,700.
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.
The closing balance of allowance for doubtful accounts need to reflect the estimated uncollectible for the company at the end of a given financial period which is usually a credit balance and shown as a deduction from accounts receivable balance in the balance sheet.
Now the balance in the allowance account=RO 1200 debit
Required balance=RO 6500 credit.
so, the required journal entry is
| Date | Accounts & Explanation | Debit (RO) | Credit (RO) |
| Bad debt expenses(6500+1200) | 7700 | ||
| Allowance for doubtful accounts | 7700 | ||
| To record bad debt expenses |
So, a debit to bad debt expenses and credit to allowance for doubtful accounts for RO 7700 is required.
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