3. The following is the trial balance of Aroro Enterprise as at 31 August 2019 Particulars Debit (RM) Credit (RM) 48,400 Capital Drawings Trade receivables Trade payables Sales 3,500 9,000 12.500 40,400 Purchases Sales returns Purchases returns 31,000 300 250 Wages and salaries Discounts allowed Discounts received Provision for doubtful debts 5.600 120 200 300 Insurance 700 Inventory as at 1 September 2018 Utilities Rates Premises Fixtures and fittings Motor van Cash in hand Cash at bank TOTAL 2,400 950 350 10,000 3,000 20.000 330 14,800 102.050 102.050 Additional information as at 31 August 2019: i. Inventory as at 31 August 2019 amounted RM3,300 ii. An entity from whom there is accounts receivables of RM200 was unable to settle his debt and this amount is to be written off as bad debts. i. The provision for doubtful debts is 1% of the outstanding trade receivables. iv. The owner took RM100 worth of goods from the business for his own use Required: a) Statement of Profit or Loss and Others Comprehensive Income for the year Ended 31 August 2019. b) Statement of Financial Position as at 31 August 2019.
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.
Receivables Accounting System
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