Concept explainers
(a)
Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.
Bad debt expense:
Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.
Allowance method:
It is a method for accounting bad debt expense, where amount of uncollectible accounts receivable are estimated and recorded at the end of particular period. Under this method,
Aging of receivables method:
A method of determining the estimated uncollectible receivables, based on the age of individual accounts receivable is known as aging of receivables method.
To determine: The total estimated bad debts using the given information.
(b)
To prepare: The year-end
(c)
To discuss: The implication of the changes in the aging schedule from the year 2016 to the year 2017.
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