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Hi i have two questions on this topic
1) at 30 june companys allowance for receivables was $39000. Trade receivables $517000 & written off was $37000. It was also decided to adj the allowance for receivables 5% of the remaining trade receivables
Whats the allowance for receivables on the income statement?
2) a bal of $2000 due from x co is considered irrecoverable and is to be w/o. Y co was in financial difficulty and apple provides allowance for receivables of 60% of there bal of $1600. She has also decided to make a general allowance of 10% of remaining receivables.
Whats the value on the statement of financial position?
King regards and thank you in advance
1. The expense in the Statement of profit or loss is the change in the allowance. At the end of the year, an allowance is need of 5% x (517,000 – 37,000) = 24,000
At the start of the year the allowance was 39,000, so there is a negative expense of 39000-24000 = 15,000.
Obviously there is also the expense of the irrecoverable debt of 37,000 and to the net expense is 37000 – 15000 = 22,000.
(I can’t believe that the question actually asked ‘what is the allowance for receivables on the income statement’. More likely it wanted the total expense on the income statement for irrecoverable debts and allowance for receivables.)
2. You have not typed the full question and so I cannot give you a complete answer.
However, the allowance in respect of Y is 60% x 1600 = 960. In addition there is the general allowance of 10% of whatever receivables are at the moment, less the 2000 from X (which is irrecoverable) and less the 1600 from Y which has already been dealt with).
Thank you John Moffatt i will try to find the full question and ask again , thank you for your help 🙂 i appreciate it
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