Statement 1; The balance of allowance for uncollectible account as of December 31, 2021 is P34,000. Statement 2: The balance of allowance for uncollectible accounts as of December 31, 2022 is P39,500.
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.
![The following is the summary of transactions of AA Company in 2021 and 2022:
2022
2021
Credit sales
P6,000,000 P5,620,000
Collections of outstanding receivables
5,830,000
4,800,000
Accounts written off
60,000
20,000
Recovery of accounts previously written off
15,000
none
Days past invoice date at December 31
2022
2021
0-30
600,000
500,000
31 90
150,000
180,000
91 180
110,000
Over 180
30,000
The company's policy to provide allowance on its account receivable at year end as follows: 0-30 days - 2%; 31-90 days - 5%; 91-180 days - 10%; and over 180 days - 20%.
Statement 1; The balance of allowance for uncollectible account as of December 31, 2021 is P34,000.
Statement 2:The balance of allowance for uncollectible accounts as of December 31, 2022 is P39,500.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4ece0784-63e3-4ad2-ba52-cab1c99c9a84%2Fd279a090-f830-42aa-805f-a134c8932d9f%2Fpsckusp_processed.jpeg&w=3840&q=75)
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