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Accounting

Hello: 0345-2419117

Valuation of Accounts Receivable


Accounts Receivable
Net Realizable Value (NRV)
Net Realizable Value (NRV) = Accounts Receivable Allowance for Bad Debts

Bad Debts

According to Records
Calculation

According to

Direct Method/Net Method:


Approach:

Income Statement

Bad Debt Expense Dr.

Rate of

Accounts Receivable Cr.


Indirect/Allowance/Gross Method:
Approach:
Bad Debts Expense Dr.
applied
Allowance for Bad Debts Cr.
Receivable.
Bad Debts Expense
Bad Debts Expense =
Bad Debts Expense =
Bad Debts Expense =

Debit
Credit

Bad Debts is applied


on sales.
Balance Sheet
Rate of Bad Debts is
on Accounts

By Income Statement Approach:


Net Credit Sales x Rate of bad Debts
100000 x 2%
Rs. 2000 (Entry Amount)

Written off
Balance C/F

Allowance for Bad Debts


Rs. 7000
Balance B/F
Rs.10000
Rs.5000
Bad Debts Expense
Rs. 2000

Adamjee Coaching Centre


1st Floor, Sami Chamber Opp. D.M.C. (Campus VIII), M.A Jinnah Road, Karachi. Tel: 021-3 2218260,
32637820
Father Coaching Centre

Accounting
Hello: 0345-2419117
.

Rs. 12000
Balance B/F

Rs. 12000
Rs. 5000

Bad Debts Expense By Balance Sheet Approach:


Eastimated Allowance = Accounts Receivable (Ending) x Rate of bad Debts
Eastimated Allowance =
70000
x
10%
Bad Debts Expense
=
Rs. 7000 (Balance Sheet Amount)
Less: Unadjusted Cr. Balance (If any)
Rs. (1000)
Add: Unadjusted Dr. Balance (If any)
Rs. 1000
Bad Debt Expense Entry Amount
Rs. 7000

Debit
Credit

Written off
Balance C/F

Allowance for Bad Debts


Rs. 7000
Balance B/F
Rs.10000
Rs.5000
Bad Debts Expense
Rs.

Rs.
Balance B/F

Rs .
Rs.

1.
2.
3.
4.
5.
6.
7.
8.

Sales (including Cash Sales Rs. 250000) Rs. 600000.


Sales return Rs. 50000.
Sales discount allowed Rs. 50000.
Uncollectable account written off Rs. 30000.
Cash collected from customer Rs 300000.
Received cash from Customer which was previously written off.
Received cash from Customer which was written off last year.
Advance received from customer Rs.25000 recorded as normal cash
collection.
9. A customers amount in subsidiary ledger showed a credit balance of Rs.
5000.
10. Promissory note of Rs.10000 from a customer to apply on account
unrecorded).
11.
Bad Debts expense is 10% of N.C Sales.
Adamjee Coaching Centre
1st Floor, Sami Chamber Opp. D.M.C. (Campus VIII), M.A Jinnah Road, Karachi. Tel: 021-3 2218260,
32637820
Father Coaching Centre

Accounting
Hello: 0345-2419117

Required:
Pass general journal entries including Adjusting & Closing entries.

Adamjee Coaching Centre


1st Floor, Sami Chamber Opp. D.M.C. (Campus VIII), M.A Jinnah Road, Karachi. Tel: 021-3 2218260,
32637820
Father Coaching Centre

Date

Particular

P/
R

Accounting

Debit

Credit

Accounts Receivable
Rs.
Hello: 0345-2419117
1
Cash
350000
Sales Revenue
Rs.
Rs.
To close all assets accounts
250000
600000
Sales Return & Allowance
Accounts Receivable
2
To close all liabilities & contra accounts
Rs.
Rs.
Sales Discount
50000
50000
Accounts Receivable
3
To record Purchase consideration
Rs.
Rs.
Allowance for Bad Debts
4
50000
50000
Accounts Receivable
To record
Cash
5
Rs.
Rs.
Accounts Receivable
30000
30000
To record
.
6(a)
Accounts Receivable
Rs.
Rs.
Allowance for Bad Debts
300000
300000
To record
6(b)
.
Cash
Rs.
Rs.
Accounts Receivable
7(a)
30000
30000
To record
.
Accounts Receivable
7(b)
Rs.
Rs.
Retained Earning
30000
30000
To record
.
8
Cash
Rs. xxxx
Rs. xxxx
Accounts Receivable
To record
9
.
Rs. xxxx
Rs. xxxx
Cash
Accounts Receivable
10
To record
Rs.
Rs.
.
25000
25000
Cash
11
Accounts Receivable
To record
Rs. 5000 Rs. 5000
.
Promissory Notes Payable
Accounts Payable
Rs.
Rs.
To record
10000
10000
.
Bad Debts Expense
Adamjee Coaching Centre
Allowance for Bad Debts
1st Floor, Sami Chamber Opp. D.M.C. (Campus VIII), M.A Jinnah Road, Karachi. Tel: 021-3 2218260,
Rs. xxxx
Rs. xxxx
To
record
32637820
.

Father Coaching Centre