On April 2, Jennifer Elston uses her Target RedCard to purchase merchandise from a Target store for $1,500. On May 1, Elston is billed for the $1,500 amount due. Elston pays $500 on the balance due on May 3. Elston receives a bill dated June 1 for the amount due, including interest at 1.0% per month on the unpaid balance as of May 3. Prepare the entries on Target’s books related to the transactions that occurred on April 2, May 3, and June 1. On July 4, Spangler’s Restaurant accepts a Visa card for a $200 dinner bill. Visa charges a 2% service fee. Prepare the entry on Spangler’s books related to this transaction.
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.
On April 2, Jennifer Elston uses her Target RedCard to purchase merchandise from a Target store for $1,500. On May 1, Elston is billed for the $1,500 amount due. Elston pays $500 on the balance due on May 3. Elston receives a bill dated June 1 for the amount due, including interest at 1.0% per month on the unpaid balance as of May 3. Prepare the entries on Target’s books related to the transactions that occurred on April 2, May 3, and June 1.
On July 4, Spangler’s Restaurant accepts a Visa card for a $200 dinner bill. Visa charges a 2% service fee. Prepare the entry on Spangler’s books related to this transaction.
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