Record the write off for bad debts based on the this information: Alpha Company's accounts receivable and allowance for doubtful accounts balances were RM100000 and RM14000 (credit) respectively, at the beginning of 2012. During 2012, a customer defaults on a RM12000 balance related to goods purchased during 2011. By the end of the year, the company had mad credit sales of RM2400000 and collected RM2200000 on account. Estimates 1 percent of its credit sales will default.
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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