QUESTION 3 At year-end, Shifty Ltd had a balance of accounts receivable of $90 000 and an allowance for doubtful debts of $4000. It was decided to write off the debt of Wriggler, totalling S2500, as irrecoverable. It was further decided that the allowance for doubtful debts should stand at 5% of accounts receivable What was the journal entry needed to write off the debt of Wriggler as irrecoverable? OA. DR Bad debts expense S2500 CR Accounts receivable $2500 OB. DR Bad debts expense CR Cash S2500 $2500 O C. DR Bad debts expense CR allowance for doubtful debts S2500 S2500 O D. DR Allowance for doubtful debts S2500 CR Accounts receivable $2500
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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