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Credit sales:
May (actual) $ 40,000
June (actual) $ 30,000
July (estimated) $ 25,000recent debt collection experience:
– current month’s sales 20%
– Prior month’s sales 60%
– Sales two months prior 10%
– Cash discounts taken 5%
– Irrecoverable debts 5%Q> why do we not take out the irrecoverable debt of 5%? Isn’t this what cannot be considered to be received from the credit customer?
Also do we not take out the cash discount as this would be a cash discount not a trade receivable discount?
Thank you very much as always!
There is no need to take out the discounts and irrecoverable debts separately because by taking the 20%, 60%, and 10% (a total of 90%) you are already excluding the 10% total of discounts and irrecoverable debts.
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