The premium on a three-year insurance policy expiring on December 31, 2018 was paid in total on January 1, 2016. Assuming that the original payment was recorded as a prepaid asset, how would each of the following be affected in 2018? a. No change in prepaid assets; increase in expenses b. No change in prepaid assets; no change in expenses c. Decrease in prepaid assets; no change in expenses d. Decrease in prepaid assets; increase in expenses
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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