In exercise-6 we used formula approach to calculate cash received from customer. We can also compute this figure by making an accounts receivable t-account. In this exercise, we shall use the data from exercise-6 and calculate cash received from customers during a period using t-accounts approach.

Exercise-7 (a):

The followin information belongs to Alpha company:

Year 2015 Year 2014
Accounts receivable $70,000 $62,000
Allowance for doubtful accounts $3,200 2,100
Sales $126,500 $155,300

The company sells goods on credit. For the year 2015, bad debts expense were $7,500 and accounts amounting to $6,400 were written-off.

Required: Find out the amount of cash collected from customer using t accounts approach.

Solution:

cash-collected-from-customers

*Balancing figure – the cash received from customers.

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