On December 31, 20X1, Vale Company had an unadjusted credit balance of $1,000 in its Allowance for credit losses. Vale analyzes its historical experience related to receivables in specific age categories and estimates the expected credit loss for each category based on government forecasts of the economy. The resulting analysis is shown below. Age Amount Estimated Credit Loss 0–30 days $ 60,000 5 % 31–60 days 4,000 10 Over 60 days 2,000 70 Required: What amount should Vale report as Allowance for credit losses in its December 31, 20X1, balance sheet?
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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