the terms in the left-hand column below with the descriptions on the right. 1. Percentage of credit sales method a. Required to recognize bad debt under GAAP 2. Direct write-off method b. Estimate of bad debt expense based on the age of outstanding receivables 3. Allowance method c.
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.
Match the terms in the left-hand column below with the descriptions on the right.
|
1. Percentage of credit sales method |
a. Required to recognize |
|
2. Direct write-off method |
b. Estimate of bad debt expense based on the age of outstanding receivables |
|
3. Allowance method |
c. Estimate of bad debt based on credit sales |
|
4. Percentage of |
d. Required to recognize bad debt under tax law |
The term "credit sales" refers to the transfer of ownership of goods and services to a consumer with the expectation that the outstanding balance will be paid later. In other words, credit sales are purchases made by customers who do not pay in full at the time of purchase.
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