8. Accounting for irrecoverable debts and allowances for receivables

Question 1

Irrecoverable debts

Answer 1

Amounts that the business will not receive from it’s customers

Question 2

accounting for irrecoverable debts

Answer 2

DR Irrecoverable debts expense account (SPL)
CR receivables account (SFP)

DR Bank account
CR receivables account

Question 3

part payment of an irrecoverable debt after write off

Answer 3

Bring CR balance down from receivables

Payment
CR receivables
DR Bank

Write off
DR irrecoverable debts expenses account
CR receivables

Question 4

Allowance for receivables

Answer 4

Some debts are only doubtful and therefore not appropriate to write off whole balance

assumption is allocated to the account at the beginning of the year but can be altered throughout the year but only the movement in numbers is recorded i.e. increase 300 to 350, add 50

Question 5

Double entry for allowance for receivables

Answer 5

DR Irrecoverable debts expense account (SPL)

CR Allowance for receivables account (SFP as liability)

Question 6

Accounting for increase in allowance for receivables

Answer 6

DR irrecoverable debts expense

CR allowance for receivables

Question 7

Accounting for decrease in allowance for receivables

Answer 7

CR irrecoverable debts expense

DR allowance for receivables