Question

During the accounting period, Ourso recorded $14,000 of sales revenue on account. The company also wrote off a $150 account receivable. Required: a. Determine the amount of cash collected from receivables. b. Determine the amount of uncollectible accounts expense recognized during the period.

Answer 1

a. The amount of cash collected from receivables is $13,850

b. The amount of uncollectible accounts expense recognized during the period is $150

Account Receivables Recognition

Customers that do not pay Cash immediately after sale are called Account Receivables or Trade Debtors

Recording the Sale

Debit : Account Receivables $14,000

Credit : Sales $14,000

Recognising the uncollectible accounts

Any amounts that become uncollactable are written off and are known as Bad Debts. Bad Debts reduce the value of Account Receivables as follows :

Debit : Bad Debts $150

Credit : Account Receivables $150

Recognition of Cash Payment

The remainder of Debts after Bad Debts are written off are then collected, this reduces the amount of Assets hold up in Trade Debtors and recorded as follows

Debit : Cash $13,850

Credit : Account Receivables $13,850

In conclusion, the amount of cash collected from receivables is $13,850 and the amount of uncollectible accounts expense recognized during the period is $150

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