n connection with the closing of Rite Aid's books for the second quarter of FY 1998 (August 1997), Rite Aid credited its retail stores general ledger expense accounts for the month of August by a total of $9 million across eleven separate accounts. The amounts credited in August were reversed in the following month, September. The effect of the expense reductions was to overstate Rite Aid's pre-tax income for the second quarter of FY 1998 by $9 million. The reversal in the following month had the effect of understating pre-tax income in the third quarter of FY 1998. Joirnal entry used to cover up the fraud?
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.
In connection with the closing of Rite Aid's books for the second quarter of FY 1998 (August 1997), Rite Aid credited its retail stores general ledger expense accounts for the month of August by a total of $9 million across eleven separate accounts. The amounts credited in August were reversed in the following month, September. The effect of the expense reductions was to overstate Rite Aid's pre-tax income for the second quarter of FY 1998 by $9 million. The reversal in the following month had the effect of understating pre-tax income in the third quarter of FY 1998. Joirnal entry used to cover up the fraud?
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