On January 1, 2020, the balance of accounts receivable of Ortega Company was P5,000,000 and the allowance for doubtful accounts on same date was P800,000. The following data were gathered: Problem / Writeoffs Recoveries Credit sales P20,000 30,000 50,000 145,000 P250,000 400,000 2017 P10,000,000 2018 14,000,000 2019 16,000,000 2020 25,000,000 650,000 1,100,000 Doubtful accounts are provided for as percentage of credit sales. The accountant calculates the percentage annually by using the experience of the three years prior to the current year. 7. How much should be reported as 2020 doubtful accounts expense?
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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