The following accounts are taken from ABC Company's trial balance on September 1, 20 which uses the allowance method to record its uncollectible accounts: Accounts Accounts receivable Allowance for doubtful accounts Sales Sales discount Sales returns and allowances Debit 30,000 4,000 2,000 3,000 Credit $75,000 Prepare the journal entry required to: 1. Record bad debts if they are estimated at 5% of the accounts receivable. 2. Record bad debts if they are estimated at 7% of the sales. 3. Record the write-off for $1000.
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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