Irrecoverable Debt and Doubtful Debt

Question 1

Where is Irrecoverable Debt found on the financial statements?

Answer 1

Expense, P&L

Question 2

What is the double entry for Irrecoverable debt?

Answer 2

Dr Irrecoverable Debt Expense
Cr RLCA (Recievables)

Question 3

In the Irrecoverable Debt T Account is it balance b/d or Send to P&L

Answer 3

Send to P&L

Question 4

If a debt is paid at a later date, and you have already recorded what is the double entry?

Answer 4

Dr Bank
Cr Irrecoverable debts

Question 5

What is a doubtful Debt and what may cause a doubtful debt?

Answer 5

Doubtful Debts are debts which look unlikely that payment will be received.
Doubtful debts may occur when invoices are in despute.
An account is created called allowence for doubtful debts.

Question 6

What is the double entry for doubtful debts?

Answer 6

Dr - Allowence for Doubtful Debts Adjustment
Cr - Allowence for Doubtful Debts

Question 7

What are the two types of allowence for doubtful debts?

Answer 7

Specific - Against a specific customer
General - % against the total of the RLCA

Question 8

Where is Allowence for doubtful debts found on the TB?

Answer 8

Dr Expense, P&L

Question 9

How to treat a General allowence?

Answer 9

Identify the receivables balance (after the Irrecoverable debt has been written off) and apply the general allowance %

Question 10

Comparing last years Doubtful Receivables with this years, if its an increase or decrease what is the Dr and Cr

Answer 10

Increase:
Dr - Allowence for DR Adj
Cr - Allowence for Dr

Decrease:
Dr - Allowence for DR
Cr - Allowence for DR Adj

Question 11

Steps to answer a question including Irrecoverable debts, specific and general allowence

Answer 11

RLCA - Irrecoverable Debt
60,000 - 3,000 = 57,000
Take off the specific allowence
57,000 - 600 = 56,400
Apply the general allowence %
56,400 x 3% = 1692
Add on the specific allowence
1692 + 600 = 2,292
Debit - Allowence DR Adj - 2,292
Credit - Allowence DR - 2,292
Compare the last years allowence for DR (2,000) to this years (2,292)
If its an increase Dr DR Adj (292) and Cr DR (292)
Adjustment sends to P&L

Question 12

Dr or Cr:
Receivables
Irrecoverable Debt
Allowence for doubtful recievables
Allowence for doubtful receivables Adj

Answer 12

Receivables - Dr
Irrecoverable - Dr
Allowence for Doubtful Receivables - Cr
Allowence for doubtful receivables Adj- Dr if increase, Cr if decrease

Question 13

If a company would like to decrease their doubtful debt allowence by £500 what is the Dr and Cr

Answer 13

Debit - Doubtful Receviables 500
Credit Doubtful Receviables Adjustment 500