When the company uses the ageing of receivables in providing allowance for bad debts, and the resulting ending balance of allowance is higher by 200% as compared to beginning balance with transactions of provisions during the period is 30% of beginning balance and the amount of write-off is equivalent to 40% of the ending balance of allowance. Which of the following is true? a. the bad debt expense is 290% of the beginning balance of allowance. b. the bad debt expense is 96.67% of the beginning balance of allowance. c. the bad debt expense is 320% of the ending balance of allowance. d. the bad debt expense is 106.67% of the ending balance of allowance.
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.
When the company uses the ageing of receivables in providing allowance for
a. the bad debt expense is 290% of the beginning balance of allowance.
b. the bad debt expense is 96.67% of the beginning balance of allowance.
c. the bad debt expense is 320% of the ending balance of allowance.
d. the bad debt expense is 106.67% of the ending balance of allowance.
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