Rules & calculation for receivable allowance

*john Stamp has opening balances at 1 January 2016 on his trade receivables account and allowance for receivables account of $68,000 and $3,400 respectively. During the year to 31 December 2016 John Stamp makes credit sales of $354,000 and receives cash from his receivables of $340,000.

The provision of credit facilities

The majority of businesses will sell to their customers on credit and state a defined time within which they must pay (a credit period). 

The main benefits and costs of doing so are as follows:

The Allowance for Doubtful Accounts

Allowance

1.The allowance for doubtful accounts is a reduction of the total amount of accounts receivable appearing on a company’s balance sheet, and is listed as a deduction immediately below the accounts receivable line item

2.The allowance for doubtful accounts represents management’s best estimate of the amount of accounts receivable that will not be paid by customers. 

Rules for bank statement

When the company receives its bank statement, the company should verify that the amounts on the bank statement are consistent or compatible with the amounts in the company's Cash account in its general ledger and vice versa.

What is Outstanding check

Outstanding check 

1.An outstanding check is a check that has been written by a company (and deducted from the appropriate general ledger cash account) but it has not yet cleared the bank account on which it is drawn.

2.Hence, outstanding checks will mean that the balance in the bank account will be greater than the balance in the general ledger account (or in an individual's check register).

What is Outstanding deposit

Outstanding deposit

1.An outstanding deposit refers to a company's receipts (cash, checks from customers, etc.) which have been recorded by the company, but the amount will appear on its bank statement at a later date. An outstanding deposit is also known as a deposit in transit.

What is Bank statement &Bank reconciliation?

 

Bank statement 
1.it  is a summary of financial transactions which have occurred over a given period on a bank account held by a person or business with a financial institution.

2.A bank statement is a record, usually sent to the account holder once per month, summarizing all transactions in an account during the time from the previous statement to the current statement.

BANK STATEMENT