usisiwe Ramaphosa established Phala Pharm, a small pharmaceutical company that supplies private clinics with medicine and medical supplies, in January 2022. Phala Pharm has grown substantially since its establishment and currently supplies 20% of private clinics in Gauteng. Sales were recognised when clinics would either pay cash on delivery or process an electronic funds transfer (EFT) before goods were dispatched. Some clinics requested that accounts be set up for them as multiple purchases were made in a month. It would be easier to make one monthly payment at the end of the month for all orders placed during the month rather than paying per order. Busisiwe agreed that this would be more practical. Phala Pharm operates from a massive warehouse
By applying all the key terms of the definition of an asset, explain why accounts receivable
should be accounted for as an asset as at 31 December 2022.
1.2 Prepare the following journal entries:
1.2.1 Phala Pharm sold medicine and medical supplies to the value of R23 500 to a private clinic on
account.
1.2.2 Recognition of the total rental income earned for the year ended 31 December 2022.