What is reported in the income statement as a result of items (1) and (2) above? Sales Revenue is increased by $ , increasing net income.
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.
| (1) | In December, customers purchased $3,000 of gift cards from Angela’s. |
| (2) | At December 31, gift cards totaling $1,900 remained unused. |
| (3) | Angela’s took a physical count of its inventory and determined the correct value of inventory should be $20,000. The unadjusted balance in the Inventory account was $20,450. |
|
No.
|
Account Titles and Explanation
|
Debit
|
Credit
|
|
(1)
|
Cash
|
3000
|
|
|
Unearned Sales Revenue
|
|
3000
|
|
|
(2)
|
Unearned Sales Revenue
|
1100
|
|
|
Sales Revenue
|
|
1100
|
|
|
(3)
|
Cost Of Goods Sold
|
450
|
|
|
Inventory
|
|
450
|
| Sales Revenue is increased by | $ | , increasing net income. |
As a result of items (1) and (2) above, sales revenue is increased by the $1,100 because only earned sales revenue is reported on the income statement. Unearned sales revenue is recorded as liability in the balance sheet because services related to the revenue received are yet to be delivered.
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