Chapter 8

Question 1

A write off and change in allowance for receivables affects the PL statement how?

Answer 1

Write off - decrease in allowance = change in P/L

Write off + increase in allowance = change in P/L

Question 2

A reduction in the allowance for receivables will _____ the irrecoverable debts expense

Answer 2

Decrease

Question 3

A reduction in allowance will do what to profit?

Answer 3

It will increase net profit (not gross profit!)

Question 4

How would an increase in allowance for receivables affect trade receivables?

Answer 4

It doesn’t; it’s only to the allowance, not to receivables

Question 5

An increase in the allowance for receivables will do what to irrecoverable debt expense?

Answer 5

Increase it

Question 6

A reduction in the allowance for receivables will be recorded as a _____

Answer 6

Debit

Question 7

A reduction in the allowance for receivables will _____ current assets

Answer 7

Increase

Question 8

Net trade receivables = trade receivables ? Written off irrecoverable debt ? Allowance for trade receivables

Answer 8

Net trade receivables = trade receivables - Written off irrecoverable debt - Allowance for trade receivables