The Allowance for Impairment on Receivables in the accounts of Excel Co. at 1 October 2020 was $21,000 and the Receivables balance was $250,100. During the year, the business made total sales of $379,900 (including cash sales of $180,900). $12,900 of defective goods were returned by credit customers. Cash receipt of $400,000 was received from these trade receivables during the financial year. $7,000 were to be written off at the financial year end of 30 September 2021. Based on past experience, Excel Co. wishes to set the allowance at 20% of the receivables. Which of the following are the correct journal entries to record the impairment loss on receivables for the year ended 30 September 2021? O 1) DR Impairment loss on Receivables $7,810 CR Allowance for Impairment on Receivables $7,810 O 2) DR Allowance for Impairment on Receivables $7,810 CR Impairment on Receivables $7,810 $8,160 $8,160 3) DR Impairment loss on Receivables CR Allowance for Impairment on Receivables DR Allowance for Impairment on Receivables $8,160 CR Impairment on Receivables 4) $8,160

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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.  

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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.