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3 years ago

How does an increase in bad debt affect a sole trader financial statement

Business

1 answer:

Kamila [148]3 years ago

7 0

Answer:

It will increase expense, thereby reducing the profit mentioned in the income statement and decrease the current asset (debtor) recorded in the balance sheet.

Explanation:

Bad Debt is an expense that is recorded when it is expected that the customer, who owes a debt to the business, might default in clearing their dues.

As such when the bad debt amount is increased it will result in a rise in expense and therefore the profit, as stated in the profit and loss (income statement) of the sole trader would decrease.

Moreover, it will also decrease the value of trade receivables (current assets) mentioned in the balance sheet. The following entry would be recorded:

Bad Debts (Dr) xxxxx

Trade Receivables (Cr) xxxxxx

Hence, the expenses will increase while the current asset will decrease.

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Before month-end adjustments are made, the February 28 trialbalance of Bose's Enterprise contains revenue of $11,000 andexpenses

AleksAgata [21]

Answer:

$2,800

Explanation:

REVENUE

Revenue $11,000

Add:

B. Revenue earned but not yet billed = $2,800

D. Unearned revenue noe earned = $2,500 $5,300

Total Adjusted Revenue  $16,300 

EXPENSES

Expenses $11,000

Add:

A. Depreciation for February = $1,200.

C. Accrued interest expense = $800

E. Prepaid insurance = $500 $2,500

Total Adjusted expenses  $13,500 

Correct net income = Total Adjusted Revenue - Total Adjusted expenses

= $16,300 - $13,500

= $2,800

6 0

3 years ago

Any agreement should, as a part of the services provided, allow your organization to __________ your disaster recovery plan. Sel

eimsori [14]

Answer:

The correct answer is A. Test.

Explanation:

A test is different from an experiment: Before performing a test, there is an expected result. The test is performed to show this result. In an experiment, the result is open. Very often, tests are performed as part of an experiment.

8 0

4 years ago

An investor asks a registered representative to underline the most important facts found in a preliminary prospectus. The regist

olasank [31]

Answer: The correct answer is "a. May not do this since it violates federal securities laws".

Explanation: The registered representative: May not do this since it violates federal securities laws.

As much as the registered representative has the approval of a company director or FINRA, he cannot underline the most important facts found in a preliminary prospectus because he would go against federal securities laws.

5 0

4 years ago

Bud exchanges land with an adjusted basis of $22,000 and a fair market value of $30,000 for another parcel of land with a fair m

DanielleElmas [232]

Answer:

The recognized gain or loss of Bud is $2,000

Explanation:

The aggregate market value is computed as:

Aggregate market value = Fair market value + Cash

= $28,000 + $2,000

= $30,000

The recognized loss or gain of Bud is computed as:

Recognized gain or loss = Aggregate market value - Fair market value

= $30,000 - $28,000

= $2,000

So, it is a gain of $2,000

4 0

3 years ago

A management that wanted to increase the financial leverage of its firm would: raise additional capital by selling fixed interes

Masteriza [31]

Answer: Raise additional capital by selling fixed Interest rate long term bonds

Explanation:

A firm can finance it's operations through equity or debts, the art of a firm financing it's operations through debts like bonds etc it's refered to as financial leverage.

A firm cannot increase it's financial leverage by selling common stock, neither through buying stock from his cash and financial leverage does relate with asset turnover.

7 0

3 years ago