Bad debts accounts are estimated to be doubtful at 5% of the accounts receivable. An extract from the trial balance shows the following balances: Accounts Receivable P200,000 Allowance for Bad Debts, credit 2,000 The net realizable value of accounts receivable after the adjustment for the current reporting period is: Select the correct response: 198,000 190,000 188,000 200,000
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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