On April 30, Victor Services had an Accounts Receivable balance of $31,200. During the month of May, total credits to Accounts Receivable were $66,400 from customer payments. The May 31 Accounts Receivable balance was $25,000. What was the amount of credit sales during May?
When companies makes credit sales, the companies accept customers' promises to pay in exchange for goods or services. The amount to be paid by the customer is recorded in accounts receivable. This figure remains on the books until payment is received or until the account is determined to be uncollectible.
Answer and Explanation:
To calculate the credit sales during the period, we'll use the following formula:
- Ending Balance = Beginning Balance + Credit Sales - Collections
- $25,000 = $31,200 + Credit Sales - $66,400
- $25,000 + $66,400 = $31,200 + Credit Sales
- $25,000 + $66,400 - $31,200 = Credit Sales
- $60,200 = Credit Sales
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from Accounting 101: Financial AccountingChapter 7 / Lesson 1