The following information was extracted from the book of XY Ltd for the year 30 September 2016. Extract of a Trial Balance as 30 September 2016 NOMIMAL SECTION Sales Cost of Sales Commission Rent Salaries Carriage on Sales Carriage on Purchases Bad debts Electricity Stationary Debit (R) 1312 500 475 120 70 000 130 400 50 000 40 000 20 000 46 500 102 400 Credit (R) 19 00
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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