Estimating Allowance for Doubtful Accounts Evers Industries has a past history of uncollectible accounts, as shown below. Age Class Percent Uncollectible Not past due 2 % 1-30 days past due 31-60 days past due 20 61-90 days past due 30 Over 90 days past due 45 Estimate the allowance for doubtful accounts, based on the aging of receivables schedule below. Evers Industries Estimate of Allowance of Doubtful Accounts Balance Not Past Due 1-30 Days Past Due 31-60 Days Past Due 61-90 Days Past Due Over 90 Days Past Due Total receivables 893,000 504,900 190,100 82,500 58,800 56,700 Percentage uncollectible 2% 5% 20% 30% 45% Allowance for Doubtful Accounts
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.
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