![]() ![]() Fortner installed a computer system in November 2012, and an aging of accounts receivable was prepared for the first time as of December 31, 2012. During 2012, credit sales totaled$9,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to$15,000. The balance in Allowance for Doubtful Accounts was $130,000 at January 1, 2012. Fortner’s usual credit terms are net 30 days. it is a standard practice to ignore changes in purchasing power of a peso Accrual basis Requires the revenue or income should be recognized when earned regardless of when collection is received and expense should be recognized when incurred regardless of when payment js made Matching principle This principle relates to the expense recognition principle which requires the costs and expenses incurred in generating the revenue should be properly matched against the related revenue in determining the net income or net loss for the periodįrom inception of operations to December 31, 2012, Fortner Corporation provided for uncollectible accounts receivable under the allowance method: provisions were made monthly at 2% of credit sales bad debts written off were charged to the allowance account recoveries of bad debts previously written off were credited to the allowance account and no year-end adjustments to the allowance account were made. Jto JNatural business year Is a twelve month period that ends on any month when the business is at the lowest point or is experiencing slack season Unit of measurement assumption This specifies that accounting should measure and report the results of a business' economic activities in terms of a monetary unit such as the Philippine Peso Unit of measurement assumption Recognizes the statements is a n effective means of aggregatibg and communicatibg accounting information Annually Financial statements may be prepared on one year Calendar year Begins on January 1 and ends on December 31 of the same year Fiscal year Begins on any month (except january) and will end on the twelfth month of the following year. ![]()
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