8. Irrecoverable debts and allowances for doubtful receivables Flashcards
Under the prudence concept a receivable should only be classed as an asset if its
recoverable
If an asset is definitely irrecoverable what should it be written off as
irrecoverable debt expense
How would you show irrecoverable debts on a double entry
Debit Irrecoverable debts (SPL)
Credit Receivable ledger control account (SOFP)
What should happen if there is uncertainty as to the recoverability of a receivable
Its called a doubtful receivable and an allowance should be made against it
What’s the allowance for a receivables
Its a credit balance which is offset against trade receivables in the SOFP
What’s the journal entry for doubtful receivables
Dr Allowance for doubtful receivables adjustments (SPL)
Cr Allowance for doubtful receivables (SFP)
Whats the journal entry for when you reduce allowance
Dr Allowance for doubtful receivables
(SFP)
Cr Allowance for doubtful receivables - Adjustments (SPL)
What’s a subsequent recovery of debts written off
If a debt is recovered having previously been written off in a previous period as irrecoverable
What’s the journal entry for when Subsequent recovery of debt written off
Debit Bank
Credit Irrecoverable debts (SPL)
General Allowance
General Allowance (percenatge) X (Balance - Debt)
What is general allowance always
A percentage
Allowance for doubtful receivables formula
(Receivables - Irr Debts - Specific All) X General Allowance + Specific Allowance
