Chapter 8 Flashcards
How do you record an irrecoverable debt?
Debit ever recoverable debt SPL and credit receivable ledger control account SFP
Define recoverable debt expense account
The expense account used to record the error recoverable debts that are written off, the balance appears as an expense in the statement of profit and loss
How is the recovery of a recoverable debt previously written off recorded?
Debit the bank and credit irrecoverable debts SPL
Define doubtful receivables
Amounts over which there are some doubt as to their recoverability
When my doubtful receivables occur
When invoices are in dispute customers are like paying when customers are in financial difficulty… Such receivables are not written off as it is not certain they are irrecoverable
Define allowance for doubtful receivables
An amount that will be deducted from the receivables ledger control account balance and the statement of financial position to reduce the balance for amounts that are possibly irrecoverable
Defind specific allowance
An allowance against particular receivables that are identified as doubtful
Define general allowance
An allowance set up as in a percentage of the receivables balance to reflect the fact that on average a certain percent of receivables will be doubtful
What are the two types of allowances to consider?
Specific provided against a particular customer and general percentage applied to the total on the receivable ledger control account after either writing off recoverable debts or deducting the full balance owned by any customers for whom a specific allowance has been created
How do you record a specific allowance for doubtful receivables?
Debit allowance for doubtful receivable adjustments SPL and credit allowance for doubtful receivables SFP
What are the steps for creating a general allowance?
Identify the receivables balance after a recoverable debts written off and excluding the full amount of receivables on which specific data has been made and then apply the general allowance present to the receivable balance identified instead one
Allowance for doubtful receivables adjustments definition
The account used to record the setting up and then adjustment of the allowance for doubtful receivables
When there is an opening balance for doubtful receivables, you need to calculate the closing balance by
Identify the opening balance for doubtful receivables, calculate the closing balance, compare the opening and closing balance. The difference is the balancing figure and equates to the allowance of doubtful receivables adjustment.
