The following information is available for Border Limited, which adjusts and closes its accounts at the end of each calendar year: • Accounts receivable at 31 December, 2022 • Allowance for doubtful accounts at 31 December, 2022 • Credit sales during 2023 • Collections during 2023 (not including write-off recoveries) • Accounts receivable written off during 2023 • Write-offs recovered in cash during 2023 $500,000 $80,000 $4,000,000 $3,000,000 $90,000 $20,000 As a result of a review on 31 December, 2023, it has been determined that 2% of the accounts receivable balance on that date is estimated to be uncollectable.
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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