Solutions

Solution 1:

Opening Balance $120,000 Cash Received $90,000

Bad Debts $10,000

Credit Sale $80,000

Closing Balance $100,000

Total $200,000 Total $200,000

1. Cash Dr. $90,000, Account Receivable Cr.$90,000

2. P/L-Irrecoverable Debt Dr.$10,000, Accounts Receivable Cr.$10,000
3. Accounts Receivable Dr.$80,000, Credit sale Cr. $80,000
Solution 2:

Opening Balance $90,000 Cash Received $70,000

Bad Debts $5,000

Credit Sale $85,000

Closing Balance $100,000

Total $175,000 Total $175,000

4. Cash Dr. $70,000, Account Receivable Cr.$70,000

5. P/L-Irrecoverable Debt Dr.$5,000, Accounts Receivable Cr.$5,000
6. Accounts Receivable Dr.$85,000, Credit sale Cr. $85,000

Solution 3.

Bad Debts -The money which is not recovered from the debtors is written o ff in the books of accounts
as bad debts. Suppose goods sold to Mr. Y worth $ 5,000 on credit and the party became the debtors
for the business for $5,000. But at the time of settlement of the transaction, the party paid only $4,500
hence the amount which is not recovered from the debtors would be written off in the books of
accounts and would be recorded as bad debts.

Doubtful Debts: The bad debts and the doubtful debts are two different terms. The doubtful debts
are the provisions made in the books of accounts for the amount unlikely to be recovered or
collected.It is the proportion of accounts receivable.

FIFO: Under FIFO (First in first out) method the inventory that is received first is issued first.