What is a receivable account?
It is the account that is established when the company performs a credit sale on the account, so that the company gives some of its customers a grace period or grace period to pay the amounts due to it.
What is a creditors account?
It is the account that is created when the company makes a long-term purchase on the account, so that the company gets a grace period or grace period to pay the amounts due on it.
What is the difference between the expense of doubtful debts and bad debts?
Doubtful debts: These are the debts that the establishment expects to be unable to collect part or all of it from the debtors, through previous experiences with them by not paying them on the specified dates, or receiving news or rumors of the debtor’s financial insolvency, or otherwise.
Bad debts: These are the debts that the company is sure of its inability to collect its debt, either because of the death of the debtor or because of his bankruptcy.
Why is provision for doubtful debts formed?
A provision for doubtful debts is created in line with the principle of prudence, which takes into account potential losses, to show the value of debts expected to be collected in the next financial period.
How is the accounts receivable account displayed in the statement of financial position?
The accounts receivable account is shown in the balance sheet with the balance shown in the trial balance, minus the provision for doubtful debts, and it appears net as follows:
List of financial position for the year...
What are the methods for determining the provision for doubtful debts?
Determining a percentage of the net deferred sales (entrance to the income statement)
Determining a percentage of the debtors’ balance (budget entry)