Irrecoverable Debts and Allowances

Question 1

What is irrecoverable debt?

Answer 1

Receivables that are not expected to be paid

Question 2

What is the double entry for irrecoverable debt being paid?

Answer 2

Dr cash Cr Irrecoverable debt expense

Question 3

What is an allowance for receivables?

Answer 3

The total potential amounts that may not be recovered from customers

Question 4

What is prudence?

Answer 4

Being more cautious on overstating assets and income and understating liabilities

Question 5

Double entry for receivables allowance

Answer 5

Dr irrecoverable debt expense Cr allowance for receivables

Question 6

Double entry for an increase in allowance

Answer 6

Dr IDE Cr allowance (required increase amount)

Question 7

Double entry for a decrease in allowance

Answer 7

Dr allowance Cr IDE (required decrease amount)

Question 8

What do you do to receivables and the allowance?

Answer 8

Trade receivables - allowance = net amount shown on SFP

Question 9

Irrecoverable debt expense =

Answer 9

Irrecoverable debts written off +/- increase/decrease in allowance - debts paid off

positive - Overall expense Dr
negative - other income Cr

Question 10

Double entry for debt paid off

Answer 10

Dr cash Cr IDE