This is Basic Company operates in an industry that has a high rate of bad debts. On December 31, 2018, before any year end adjustment, the accounts receivable balance was P8,000,000 and its allowance for doubtful accounts balance was P800,000. The year-end balance reported for the allowance for doubtful accounts is based on the following schedule: Time outstanding Accounts Receivable Percent uncollectible Under 30 days 3,000,000 10% 31-180 days 2,500,000 20% 181-360 days 2,000,000 50% More than one year 400,000 100% Accounts of P400,000 were written off during the year. What should be the doubtful accounts expense for 2020? 2,200,000 1,400,000 1,800,000 1,800,000
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.
This is Basic Company operates in an industry that has a high rate of
Time outstanding Accounts Receivable Percent uncollectible
Under 30 days 3,000,000 10%
31-180 days 2,500,000 20%
181-360 days 2,000,000 50%
More than one year 400,000 100%
Accounts of P400,000 were written off during the year. What should be the doubtful accounts expense for 2020?
- 2,200,000 1,400,000
- 1,800,000 1,800,000
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