Assignment Task

Accounts receivable is the amount payable by the customer to the company for the goods delivered and services provided. Accounts receivable is a current asset, and it is any amount owed to the company by the customers for goods purchased on credit. Bills receivable and accounts receivable are almost similar in nature, and they are used interchangeably but in fact refers to the amounts payable to a business entity under the transaction of bills of exchange in a business transaction.

Task $1$:

The company of Saham for Oil and Gas, having different branches around Sultanate of Oman. The company hired Ali as accounting manager. The company wishes from Ali to explain about accounts receivable accounting to the top management and expects you to understand the following relating to accounts receivable and prepare necessary journal entries and accounting treatment for the year ended ${31}^{st}$ December $2021.$

The company sells goods on RO $150,000$ for cash and RO $300,000$ on credit basis to various customers in the company. The company has received RO $50000$ towards credit sales and the rest is receivable according to the terms of the business transaction.

Later, the company has not received any money out of the rest of the credit sales and decided to estimate the bad and doubtful debts at $2\mathrm{.}5\%$ of the total credit sales. The company had allowance for bad and doubtful debts $($credit balance$)$ RO $3000.$

$($a$)$ You are required to explain the concept of bad debts, allowance for doubtful debts and bills receivable under accounts receivable method $(3$ marks$)$

$($b$)$ You are required to prepare journal entries for sales, credit sales, and allowance for doubtful debts and show how it will appear in income statement and balance sheet. $(4$ marks$)$