A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company’s unadjusted trial balance reported the following selected amounts: i. Accounts Receivable, $375,000 debit ii. Allowance for uncollectible accounts, $500 debit iii. Net sales, $800,000 All sales are made on credit. Based on past experience, the company estimates that 0.6% of credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
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.
A company uses the percent of sales method to determine its
i. Accounts Receivable, $375,000 debit
ii. Allowance for uncollectible accounts, $500 debit
iii. Net sales, $800,000
All sales are made on credit. Based on past experience, the company estimates that 0.6% of credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end
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