4. Adjusting the Initial Trial Balance for Irrecoverable Debts and the Allowance for Receivables

Question 1

What is the process for adjusting the initial trial balance for irrecoverable debts and the allowance for receivables. (4)

Answer 1

1. Calculate the amount of irrecoverable debts expense and the required allowance for receivables.
2. Prepare the journal entries to record the expense and the allowance.
3. Enter these journal entries in the adjustments columns of the trial balance, opening new lines for irrecoverable debts expense and the allowance for receivables if necessary.
4. Add across to prepare the final trial balance.