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

In previous exercise, we used formula approach to calculate the cash received from customers. We can also find this number 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 the period using t-account 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 was $7,500 and accounts amounting to $6,400 were written-off.

Required: Find out the amount of cash collected from customers by Alpha Company using t-account approach.

Solution:

*Balancing figure – the cash received from customers.