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Mr. John,
Could you please tell me why the correct answer of the example shown below is 49,300.For me that correct answer is 47500.00 because:
1.)Dr. Irrecoverable debts Exp./Cr. Receivables-2500 (Mike)
2.)Dr. Irrecoverable debts Exp./Cr. Allowance – 2000
3.)Dr. Cash/Cr. Irrecoverable debts Exp -1800
4.)Dr. Allowance/Cr. Irrecoverable debts Exp-2900
I can`t understand why we must debit the Receivable A/C with 1800.Yv Co’s trial balance shows a receivables’ account balance of $50,000, this includes the following:
(1) $2,500 from Mike who has gone into liquidation
(2) debts of $500 + $1,500 which are to be specially allowed for
(3) cash received from Ken of $1,800 which had previously been written off
(4) cash received from John of $2,900 which had previously been allowed for
What is the revised receivables figure?Thank you in advance.
For the 1800 received from Ken, the correct entry should have been to DR Cash and CR Irrecoverable debts expense.
However, it has been included in the receivables account. They have DR Cash CR receivables. They should not have done this because the receivable had previously been written off.
So……to correct it, they need to DR receivables (to remove the CR that they had wrongly entered) and CR Irrecoverable debts expense.
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