Exercise-7 (Cash received from customers – t accounts approach)

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.

The following information belongs to Alpha company:

  • Accounts receivable on December 31, 2015: $62,000
  • Accounts receivable on December 31, 2016: $70,000
  • Allowance for doubtful accounts on December 31, 2015: $2,100
  • Allowance for doubtful accounts on December 31, 2016: $3,200
  • Sales for the year 2015: $155,300
  • Sales for the year 2016: $126,500

The company sells goods on credit. For the year 2016, 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:

exercise-7-socf-img1

*Balancing figure – the cash received from customers.

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