On Dec. 31, 2018, Heart Inc. has allowance for doubtful accounts of $4,000. Each month, Heart Inc. makes interim provision for bad debts equal to 1% of credit sales. During 2019, total credit sales are $1,000,000 and $16,000 of accounts receivable is written off. Aging of accounts receivable at December 31, 2019 indicates that an allowance of $20,000 should be provided for doubtful accounts as of that date. How much is the total amount of debit or total amount of credit in the adjusting entry (if there is any) to be made on Dec. 31, 2019?
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 Dec. 31, 2018, Heart Inc. has allowance for doubtful accounts of $4,000. Each month, Heart Inc. makes interim provision for
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