Example of Accounts Receivable

Accounts Receivable note to the financial statements

This note should provide readers with various details regarding your company's credit granting policy, your estimated bad debt expense, your allowance for doubtful account amounts, and your ending accounts receivable balances for each forecasted year. Below provides an example of an accounts receivable note to the financial statements.

Accounts Receivable:
The company assumes a 30 day collection period from the date a sale is made. Moreover, customers are given 30 days to pay for products purchased on credit. To be objective, the company is assuming that 4% of all sales will be uncollectible and therefore considered bad debt expense. The contra account to debt expense is the allowance for doubtful account which appears on the company's balance sheet. Prior years' uncollectible accounts receivable are written off in the following year, thus assuming all bad debts are unrecoverable. The bad debt expense, allowance for doubtful account, and the company's Net Accounts Receivable at the end of each forecasted business year are as follows;

200X 200Y
Bad Debt Expense $ 5,420 $ 7,000
Allowance for Doubtful Account $ 5,420 $ 7,000
Net Accounts Receivable $14,746 $15,120


Categories: Financial