Chapter 11 - Receivables

Question 1

If a cash sale has been made and customer pay’s immediately what is the double entry?

Answer 1

Dr Cash/bank
Cr sales revenue

Question 2

If a customer sale is on credit and paid after 30-60 days what’s the two step double entry?

Answer 2

1) Dr receivables
Cr sales revenue

2) Dr cash/bank
Cr receivables

Question 3

What is an aged receivables analysis?

Answer 3

The credit control function of an entity uses the analysis to keep track of outstanding debts and follow up any that are overdue

Question 4

Timely collection of debts improves what?

Answer 4

Cash flow and reduces the risk of receivables becoming irrecoverable

Question 5

What is a credit limit?

Answer 5

The max amount of credit that the entity is willing to provide to the customer

Question 6

What do credit limits reduce?

Answer 6

Reduce risk of irrecoverable debts to the entity by limiting the amount sold on credit.
Help build up the trust of a new customer

Question 7

What is the double entry for a bad debt?

Answer 7

Dr irrecoverable debts expense account
Cr trade receivables ledger control account

Question 8

What is the step double entry to recover irrecoverable debt?

Answer 8

1) Dr bank account
Cr irrecoverable debts

Question 9

What is the double entry for an allowance for receivables?

Answer 9

Dr Irrecoverable debts expense
Cr Allowance for receivables

Question 10

What is the double entry for the increase of an allowance for receivables?

Answer 10

Dr irrecoverable debts
Cr allowance for receivables

Question 11

What is the double entry to decrease an allowance for receivables?

Answer 11

Dr allowance for receivables
Cr irrecoverable debts

Question 12

What must you remember to do before determining the allowance for receivables?

Answer 12

Write off all irrecoverable debts

Question 13

All irrecoverable debts discovered during the year and the end of the year must be charged to the SPL?

Answer 13

True

Question 14

The movement of the allowances for receivables during the year must be adjusted in the SPL

Answer 14

True

Question 15

Irrecoverable debts recovered will
Increase the cash and profit for the period

Answer 15

True

Question 16

The closing allowances for receivables will be deducted from the closing receivables at the end of the year

Answer 16

True

Question 17

The net irrecoverable debts expense at the end of the year will include adjustments for irrecoverable debts, irrecoverable debts recovered and the movement in the allowances for receivables

Answer 17

True

Question 18

A decrease in allowances for receivables will do what to the expense and profit?

Answer 18

Expense: reduce
Profit: increase

Question 19

A increase in allowances for receivables will do what to the expense and profit?

Answer 19

Expense: increase
Profit: reduces

Question 20

Irrecoverable debts do what to expenses and profit?

Answer 20

Expense: increase
Profit: reduce

Question 21

What is the trade receivables control account?

Answer 21

This is the total owed by our customers from credit sales and is maintained in a single account

Question 22

What is the trade receivables ledger?

Answer 22

This is a separate ledger that holds any account for each of our customers to allow, on a day to day basis, for the business to be conducted. Shoes sales to particular customer

Question 23

Does contra on payables get cr or dr in legder?

Answer 23

Credit

Question 24

Do cash sales get recorded in t account for receivables?

Answer 24

No

Question 25

Do discounts received get recorded in t account for receivables?

Answer 25

No