On January 1, 2021, Blue Company had Accounts Receivable and Allowance for bad debts of P360,000 and P12,000 respectively. Sales during the year 2021 amounts to P1,800,000 (all on credit). Accounts of P7,500 were written off during the year 2021. Analysis of the company's accounts receivable at December 31,2021 revealed the following: Age 0-60 days 61-120 days Over 120 days Amount P125,000 90,000 100,000 Estimated uncollectible 1% 3% 10%
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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