PA6-5 Preparing a Multistep Income Statement and Computing the Gross Profit Percentage Big Tommy Corporation is a local grocery store organized seven years ago as a corporation. The bookkeeper prepared the following statement at year-end (assume that all amounts are correct, but note the incorrect format): Net Sales Cost of Goods Sold Salaries and Wages Expense BIG TOMMY CORPORATION Profit and Loss December 31 Debit $279,000 58,000 Credit $404,000
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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