CH8 - Receivables & Irrecoverable Debts

Question 1

Receivable balance is SOFP

Answer 1

Receivable - closing allowance

Question 2

Double entry write off irrecoverable balance

Answer 2

Dr Irrecoverable debt
Cr Receivables

Question 3

Irrecoverable debts recovered within accounting period double entry

Answer 3

Dr Receivables
Cr irrecoverable debt

Question 4

Irrecoverable debt recovered AFTER accounting period

Answer 4

Dr Bank
Cr Sundry income

Question 5

In the year to 31 Dec 20X1, Tracy wrote off an amount of $275 due from a customer who had become bankrupt. She also makes allowance of 3% of the TOTAL RECEIVABLES balances at the year end. Receivables at 31 Dec 20X1 were $12,000. The previous year’s allowance was for $400.

What amount should be written off to the statement of profit or loss for the year to 31 December 20X1?

Answer 5

$235

3% × 12000 = 360
OP 400
CS 360
RED 40
$275 - $40 = $235