Irrecoverable debts/allowances Flashcards
what is bad debt also known as?
irrecoverable debt
where is irrecoverable debt expense noted?
under admin expense
how is writing off recorded?
it’s recorded on expense, and is a loss on the original sale for the business
double entry: writing off
Dr Irrecoverable debt expense
Cr Trade receivable
double entry: written off BUT unexpectedly paid
Dr cash
Cr Irrecoverable debt exp
double entry: when a cheque is received
Dr cash
Cr Trade Receivables
(reversed when cheque is dishonoured)
what is allowance for receivable?
when you think customer MIGHT NOT pay
where is allowance for receivables recorded?
a new account is made called allowance for receivables
double entry: allowances
Dr Irrecoverable debt exp
Cr allowance for receivable
how is allowance for receivable treated in SOFP
it is netted off against trade receivables
double entry: INCREASE in change n allowance for receivable
Dr Irrecoverable debt expense
Cr allowance for receivable
double entry: DECREASE in change n allowance for receivable
Dr Allowance for Receivable
Cr irrecoverable debt expense
double entry: allowance LAST year but paid THIS year
Dr Cash
Cr TR
double entry: allowance LAST year, IRRECOVERABLE this year
Dr Irrecoverable debt exp
Cr TR
How is irrecoverable exp/ allowance calculated in long form ques?
- calculate amount of irrecoverable debt and level of allowance
- add irrecoverable debt exp on relevant exp in P&L
