Chapter 9

Question 1

What is a irrecoverable debt?

Answer 1

a debt the business believe may will never be paid

Question 2

What are indications of irrecoverable debt?

Answer 2

bankruptcy of customer

disappearance of the customer

outright refusal to pay

Question 3

Do you remove irrecoverable debt from accounts?

Answer 3

yes
they are no longer an asset

Question 4

Where is irrecoverable debt put onto?

Answer 4

profit or loss

Question 5

In the case of irrecoverable debt, does original sales remain in the accounts?

Answer 5

yes

Question 6

What is the double entry requirement for irrecoverable debt?

Answer 6

Dr
irrecoverable debts expense

Cr
receivable

Question 7

What is irrecoverable debt shown as for a company?

Answer 7

it is shown as an administrative expense

Question 8

How do you account for a irrecoverable debt that has been recovered?

Answer 8

Dr
cash

Cr
Irrecoverable debt expense

Question 9

Doubtful receivables

Answer 9

is an account that may not be fully collected, indicating a risk of non-payment.
Businesses set aside a provision for potential losses.

Question 10

When should doubtful receivables be assessed?

Answer 10

each year to assess any potential future amounts that will not be recovered from customers

Question 11

What type of calculation is tested in the exam for a doubtful receivable?

Answer 11

in the exam, you will be given a probability of non-payment and you should use this to calculate the required allowance

Question 12

Do you remove doubtful receivables from recievable balance?

Answer 12

no incase the customer ends up paying

Question 13

What do we set up to recognise the possible expense of not collecting the debt?

Answer 13

an allowance for receivables is set uo

Question 14

What is an allowance for receivables?

Answer 14

a credit balance which is netted off against receivables in the statement of financial position to give a net figure of receivables that are probably recoverable

Question 15

What happens in allowance for receivables in terms of debit entry?

Answer 15

debit entry is to the irrecoverable debts account

Question 16

Calculation of the allowance for receivables

Answer 16

it is calculated after all irrecoverable debts have been written off

Question 17

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

Answer 17

Dr Irrecoverable debts expenses
- statement of profit or loss

Cr Allowance for Receivables
- statement of financial position

Question 18

When is allowance for receivables recalculated?

Answer 18

at each year end
similar to accruals

Question 19

What is the double entry for increase in allowance for receivables?

Answer 19

Dr irrecoverable debt expense

Cr allowance for receivables

Question 20

What is the double entry for decrease in allowance for receivables?

Answer 20

Dr allowance for receivables

Cr Irrecoverable debt expense

Question 21

Allowance for receivables - What happens if there is any difference between the allowance at the start of the year and the allowance at the end of the year?

Answer 21

charged/credited to the statement of profit or loss

Question 22

What is the double entry for if we receive cash from our credit customer and we previously has an allowance for the debt?

Answer 22

Dr cash

Cr receivables

Question 23

What is the double entry if we write off out customers debt and we previously has an allowance for the debt?

Answer 23

Dr irrecoverable debts expenses

Cr receivables

Question 24

What is the double entry if we write off debt as a irrecoverable and debt is subsequently recovered?

Answer 24

Dr cash

Cr irrecoverable debts expenses