If Modern Company received $3,650 from Connor Young Company on March 12 for the total amount of an account which had been written off on March 1, the entry to reinstate the account under the allowance method would include a.a credit to Allowance for Doubtful Accounts of $3,650. b.a debit to Allowance for Doubtful Accounts of $3,650. c.a credit to Cash of $3,650. d.a debit to Bad Debt Expense of $3,650.
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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