Percent of sales method; write-off At year-end (December 31), Rashed Company estimates its bad debts as 0.75% of its annual credit sales of AED790,000. Rashed records its bad debts expense for that estimate. On the following February 15, Rashed decides that the AED1,250 account of A. Abdulla is uncollectible and writes it off as a bad debt. On March 31st, Abdulla unexpectedly pays the amount previously written off. Required: Prepare the journal entries of Rashed to record these transactions and events of December 31, February 15, and March 31st.
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.
Percent of sales method; write-off
- At year-end (December 31), Rashed Company estimates its
bad debts as 0.75% of its annual credit sales of AED790,000. Rashed records its bad debts expense for that estimate.
- On the following February 15, Rashed decides that the AED1,250 account of A. Abdulla is uncollectible and writes it off as a bad debt.
- On March 31st, Abdulla unexpectedly pays the amount previously written off.
Required:
Prepare the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
