S9-4 Applying the allowance method (percentage of sales) to account for bad debts During 2017, Signature Lamp Company completed these transactions: sales revenue on credit, $320 000 (ignore cost of sales) a b collections on account, $340 000 c write-offs of uncollectables, $5 500 d bad debt expense, 2% of sales revenue. Requirement Journalise Signature's 2017 transactions. + additional requirement: Show how to report accounts receivable on the balance sheet at 31" December 2017. Follow the reporting format, as shown above, from page 413 of the textbook.
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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