The following information relates to a computer shop owner who makes all purchases on credit: at 31.12.2010 at 31.12.2009 £ £ Inventory/Stock 10,600 10,300 Trade Receivables/Debtors 5,400 4,800 Trade payables/Creditors 5,900 6,300 Transactions during 2010: £ Amount received from trade receivables/debtors 127,600 Amount paid to trade payables/creditors 93,200 Cash sales 23,200 Discount allowed to trade receivables/debtors 2,400 Bad debts written off 800 Increase in allowance/provision for doubtful debts 250 Refunds received from trade payables/creditors 80 The gross profit earned by the computer shop owner during 2010 was: Answers: a. £38,820 b. £38,870 c. £61,750 d. £62,180
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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The following information relates to a computer shop owner who makes all purchases on credit:
Transactions during 2010:
The gross profit earned by the computer shop owner during 2010 was: |
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