Receivables & Payables Flashcards
What is DE for irr debt?
Dr Irr debt
Cr receivables/debtors
How credit limit helps ?
Reduce risk of irr debt and builds trust.
When allowance for irr debt can be created ? How ?
When there is still hope to recover, based on objective evidence.
( debt is still in receivables ledger, must be specific amount)
Dr irr debt expense
Cr allowance for receivables (debtors ledger to offset asset temporarily)
What is purpose of creating allowance for debt ?
Recognise debt expense but leave amount in receivables
What if there is already allowance in account (opening allowance) ?
Only movement during year is charged to P/L
What is liability ?
Obligation to transfer economic benefit
What is provision?
Liability of uncertain timing and amount
What is required to recognize provision?
What is DE ?
-there is present obligation
-probable that transfer will be required
-estimate can be made
Dr expense
Cr Provision
What are types of obligation ?
Legal(contract, law)
Constructive(derives from company’s actions,policy ex returns-refunds)
What is contingent liability/asset?
Possible liability arising from past events, provision if certain or probable
Disclose in note if possible.
Asset should be recognize if certain, if probable disclosed in note.
