A Level Accounting (9706)•9706/11/M/J/21
Explanation
Reconstructing the trade receivables account Steps:
- Year-end net receivables 2545 ÷ 0.95 = $2680.
- Debit side: opening $2500 + sales S.
- Credit side: cash 450 + closing gross $2680.
- S = 4260 + 2500 = $4850.
Why D is correct:
- Matches the accounting equation for credit sales in the trade receivables T-account: sales = cash collections + bad debts written off + closing balance - opening balance.
Why the others are wrong:
- A omits bad debts write-off from the equation.
- B subtracts bad debts instead of adding.
- C uses net closing balance directly as gross.
Final answer: D
Topic: Preparation of financial statements
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