Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › bad debts
- This topic has 14 replies, 2 voices, and was last updated 7 years ago by John Moffat.
- AuthorPosts
- June 10, 2016 at 6:14 pm #322128
Dear sir,
-At 1 Jan 2011, there were an allowance for receivables $3,000. During the year, $1000 of debts were written off,and $800 were recovered. At 31 Dec 2011, it was decided to adjust the allowance for receivables to 5% of receivables which are $20,000.
What is the total receivables expense for the year?
A. $200 debit
B.$1,800 debit
C.2,200 debit
D.1,800 creditThe answer is D.
However when making the T ledger for the receivables expense,
on the debit side we got: bad debts $1000
allowence $2000(3000-[20000 x 5%]on the credit side we got: debts received $800
Therefore we should end up with $2,200 credit.
Please locate what’s my mistake sir.
Thanks.
June 11, 2016 at 7:54 am #322303There is no such account as the receivables expense! You mean the irrecoverable and doubtful debts expense!
The allowance is reducing by 2,000 (not increasing) and therefore you should credit the expense account with 2,000.
June 12, 2016 at 10:50 am #322540Thanks sir.
June 12, 2016 at 1:09 pm #322564You are welcome 🙂
June 13, 2016 at 3:40 pm #322753Dear sir,
Concerning example 3 in the free lectures, there is a note where Paul and Ann amount are included in the total cash receipts. However if it this was not the case, that is, the amount of Paul and Ann amount would not have been included in the cash receipts, then what would be the double entry?( what to DR and what to CR)Thanks.
June 13, 2016 at 4:32 pm #322761Dear sir,
Is provision for doubtful debt and allowance for receivables the same thing???June 13, 2016 at 6:01 pm #322786Yes – provision for doubtful debts is the old name for allowance for receivables 🙂
June 14, 2016 at 4:23 pm #322899Dear sir,
Concerning example 3 in the free lectures, there is a note where Paul and Ann amount are included in the total cash receipts. However if it this was not the case, that is, the amount of Paul and Ann amount would not have been included in the cash receipts, then what would be the double entry?( what to DR and what to CR)June 14, 2016 at 5:32 pm #322913But I state this in the lecture!
In the case of Paul, you would debit cash and credit irrecoverable debts expense.
In the case of Ann, you would debit cash and credit receivables,
August 29, 2016 at 9:56 am #335933At 1 Jan 2014, T had total receivables of $380,000. A specific allowance of $20,000 has been made for a business customer.The general allowance was 2.5%. During the year, there was a bad debt of $28,000, none of which is expected to be recovered. At 31 Dec 2014, T had a total receivables of $420,000 and general allowance for receivables was increased to 3%
What was the expense shown on the SOPL for year 31 Dec?
The answer is $11,600I have done:
-Receivables at start $380,000 less S.A $20,000 less Bad debt $28,000=$332,000
Therefore G.A is (20,000)+(332,000 x 2.5%)=28,300-Receivables at end is 420,000; therefore G.A is 3% x 420,000=$12,600
Therefore we have a Bad debt $28,000 – (28,300-12,600)=$12,300
Could you locate my mistake?
Thanks.
August 29, 2016 at 1:34 pm #335990The irrecoverable debt occurred during the year and therefore should not have been subtracted when calculating the general allowance at the start of the year.
August 29, 2016 at 2:14 pm #336026what do you mean by “The irrecoverable debt occurred during the year and therefore should not have been subtracted “?
August 29, 2016 at 2:28 pm #336027The question says “During the year, there was a bad debt of $28,000” so why do you want to remove it when calculating the allowance at the start of the year?
August 29, 2016 at 3:49 pm #336037The balance at start for receivables was $380,000. During the year, there was a bad debt of $28,000. Therefore we need to remove this bad debt by debiting expense account and crediting trade receivables.
August 29, 2016 at 7:50 pm #336081Don’t be silly!
You are given the receivables at the end of the year. The only relevance of the receivables at the start of the year is so as to be able to calculate the allowance brought forward.
- AuthorPosts
- The topic ‘bad debts’ is closed to new replies.