Chapter 8 - Irrecoverable debts and allowances Flashcards
1
Q
What is irrecoverable debt?
A
A debt which a business believes will never be paid.
2
Q
Why might a customer NOT pay a debt?
A
- Customer goes bankrupt
- Customer “dissapears”
- Customer refuses to pay outright
3
Q
What is the double entry to account for an irrecoverable debt?
A
Dr IRD Cr Trade Receivables
4
Q
How does a company show an irrecoverable debt?
A
As an admin expense
5
Q
What is an allowance for receivables?
A
A credit balance which is TAKEN AWAY from trade receivables in the SFP to give a net figure for receivables that are probably recoverable.
6
Q
What is the double entry to create the allowance for receivables?
A
Dr IRD Cr Allowance
