Question

Q9.Al ZakiCompany doing the business for sale of Televisions. The company made total sales of 10 Million in which Cash Sales were OMR 3 Million.As the Company make sales on credit to different customers it reports the following financial information before adjustments.Debit Balance of Account Receivable OMR 475,000.Debit Balance of Allowance for Doubtful Accounts OMR 22,500.Al Zaki Company estimates bad debts at 3.5% of net sales and follows direct write off method to record the Journal entries. Based on the previousyears’ experience Al Zaki Company also estimated bad debts at 6.25% of account receivables as per the allowance method on credit sales. As Al ZakiCompany has not received the full amount it has written off the estimated amount of account receivables on 30 October. In the month of January the customers has paid the full amount which was written off by Al Zaki Company. You are required to write the necessary Journal entries.

Answer 1

Below table popilate the workings basis before we record JV's-

Sales	1,00,00,000
Cash sales	30,00,000
Credit sales	70,00,000
Estimated Bad debts %	3.50%
Estimated Bad debts	2,45,000
Accounts receivable	4,75,000
Estimated Bad debts %	6.25%
Estimated Bad debts	29,688
Allowance for doubtful debts	22,500
Estimated amount	29,688
Additional entry to be recorded	7,188

Following JV's shall be recorded-

Date	Ledger Account Name	Debit	Credit
30-Oct	Bad debts expenses---Dr.	2,45,000
	To Accounts receivable		2,45,000
	(Being bad debts expenses recorded on net sales)
30-Oct	Allowances for bad debt A/c---Dr.	7,188
	To Accounts receivable A/c		7,188
	(Being allowances created for AR)
31-Jan	Bank/ Cash A/c---Dr.	2,45,000
	To Bad debts recovered A/c		2,45,000
	(Being bad debts recovered)