The beginning balance in Accounts Receivable on Company A’s Year 2 Balance Sheet is $20,000 and the ending balance is $110,000. Cash collections from customers are $105,000, and an account for a customer owing $5,000 was written off because the company didn’t think the customer would pay. What is the Sales on account during Year 2 on the Year 2 Income Statement? Assuming no other transactions affected the account during the year.
Correct answer. The Ending Balance in AR 110,000 = the Beginning Balance in AR 20,000 + Sales on account (?) – Cash collections 105,000 – Write-off of AR 5,000. Revenue = 110,000 + 5,000 + 105,000 – 20,000 = 200,000.
