Ruby Company sold accounts receivable without recourse with face amount of Php5,000,000. The factor withheld 10% of the accounts factored as protection against customer returns and other adjustments. The entity had previously established an allowance for doubtful accounts of Php100,000 for these accounts. By year-end, the entity had collected the factor's holdback there being no customer returns and other adjustment. How much is the Commission charged by the factor if the loss on factoring amounted to Php600,000?
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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