The following trial balance was extracted from the books of Movies To The Max Ltd at December 31, the end of the company's financial year. The company is owned by Samuel Maximo and is in the business of buying and selling movies on tapes. Trial Balance as at July 31, 2021 Trial Balance A/C Name DR CR Cash Accounts receivable Allowance for bad debt Merchandise Inventory Store Supplies Prepaid Rent Computer and Equipment Accumulated depreciation-Computer and Equipment Delivery Truck Accumulated depreciation - Delivery Truck Accounts payable Wages payable Uneamed Sales revenue Notes Payable, Long Tem Samuel Maximo, Capital Samuel Maximo, Withdrawals Sales revenue 750.000 290,500 25,000 167,050 120,000 510,000 1,200,000 1,900,000 150,000 400,000 150,000 1,000,000 2,500,000 105,000 2,833,580 Sales discount Sakes returns and allowances Cost of goods sold Wages Expense Rent Expense Depreciation Expense - Computer and Equipment Depreciation Expense -Delivery Truck Store Supplies Expense Utilities Expense Bad Debt Expense Interest Expense 73,250 52,100 495,000 325,125 680,000 65,000 220,000 105,555 Total 7,058,580 7,058,580 The following additional information is available at July 31, 2021: (i) Insurance of $510,000 was paid on April 1, 2021, for six (6) -months to February 2022. (ii) The computer and equipment were purchased on December 1, 2020 and have an estimated useful life of 10 years. This asset is depreciated on the double-declining depreciation method down to a residual value of $100,000.
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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