Sanders Inc. is a small brick manufacturer that uses the direct write-off method to account for uncollectible accounts. At the end of 2021, its balance for Accounts Receivable is $35,000. The company estimates that of this amount, $4,000 is not likely to be collected in 2022. In 2022, the actual amount of bad debts is $3,000. Record, if necessary, an adjustment for estimated uncollectible accounts at the end of 2021 and the actual bad debts in 2022.
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.
Sanders Inc. is a small brick manufacturer that uses the direct write-off method to account for uncollectible accounts. At the end of 2021, its balance for
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