The financial year end of Pradami Enterprise is on 31 July every year. It has RM30,800 in its allowance for doubtful debts account as at 31 July 2018. The following information is related to its account receivables, allowance for doubtful debts and bad debts for two financial years: Account receivables TRTA Trading Hanabella Enterprise Zara Mewah Enterprise Starbot Sdn. Bhd Mariposa Trading Marmalade Trading Bad debts to be written off (RM) 250,000 250,000 88,800 500,000 168,000 100,000 2019 10% 2020 10%
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 financial year end of Pradami Enterprise is on 31 July every year. It has RM30,800
in its allowance for doubtful debts account as at 31 July 2018. The following
information is related to its account receivables, allowance for doubtful debts and bad
debts for two financial years:
Q3.
Account receivables
TRTA Trading
Hanabella Enterprise
Zara Mewah Enterprise
Bad debts to be written off
(RM)
250,000
250,000
88,800
500,000
168,000
100,000
|2019
10%
2020
Starbot Sdn. Bhd
Mariposa Trading
Marmalade Trading
10%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F25e09d27-32f0-4b9d-8509-c8b0c24b82de%2F3cc27e9f-6d27-4a49-8293-321dbb377a21%2Foajxt2w_processed.jpeg&w=3840&q=75)
![Q3. (Continued)
The allowance for doubtful debts of Pradami Enterprise for the year ended 2019 and
2020 are 5% and 4% respectively.
REQUIRED:
(a)
Prepare the bad debts account for the years ended 31 July 2019 and 2020.
(b)
Write up the allowance for doubtful debts accounts for the years ended 31 July
2019 and 2020.
Provide the relevant journal entries for Pradami Enterprise assuming 30% of the
bad debt written off for the financial year ended 2020 is recovered on 1 January
2021.
(c)
(d)
If the allowance for doubtful debts is not included in the accounting books
during the financial year, which accounting concept would be violated and how
this will affect the financial statements of a business? Discuss.
your opinion, how Pradami Enterprise estimales the allowance for doubtful
debts every year? Explain TWO (2) available methods to estimate the amount.
(e)
In
(f)
List ANY FOUR (4) possible reasons that will give rise to bad debts.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F25e09d27-32f0-4b9d-8509-c8b0c24b82de%2F3cc27e9f-6d27-4a49-8293-321dbb377a21%2Fx0ucjl_processed.jpeg&w=3840&q=75)
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