Question

An aged trial balance of accounts receivable is normally used by the auditor to evaluate the...

An aged trial balance of accounts receivable is normally used by the auditor to evaluate the

        adequacy of the allowance for doubtful accounts involving accounts receivable. The company’s

       credit terms are 2% 10, net 30. The aged trial balance was made on December 31, year 1. The

       auditor reviews the work on January 30, year 2. An outstanding accounts receivable on December

       31, year 1 was for a sale invoiced on November 22, year 1 would be classified on the aged trial

       balance as:

     a. Current.

      b. Past due

       c. More than 30 days past due.

       d. More than 60 days past due.

explanation needed.

Business   Accounting   
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Answer #1

The company's credit terms are 2%10,ney 30 - this means that the company will give trade credit by two options.

One is the customer (debtor) will get 2% discount if he pays entire amount with in ten days from the date of invoice raised.

Other is customer (debtor) need to pay with in 30 days from the invoice raised.

In given question,

At the aged trial balance on December 31, year1 - In accoubts receivable, there was one sale invoice dated November 22 of year 1. Now, as this is being part of accounts receivable we can observe the following points from it...

a) this sale invoice was not paid till december 31 of year 1

b) customer had not been received 2% discount, as he failed to pay the amount with in ten days from the invoice raised that is november 22 of year 1

c) customer failed to pay the amount with in 30days from the invoice raised.

d) therefore this invoice value shall be classified on aged trial balance as MORE THAN 30 DAYS PAST DUE that is option C.

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