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On 15/1/2015 a customer who owed a material amount went into liquidation
and there is no hope of any amounts being recovered.Which of the following is the appropriate treatment of this
event in the financial statements of 31/12/2014?A. Write off the receivable in the financial statements and explain
in a note what has happened.B. Do not adjust the receivable in the financial statements, but
explain in a note what has happened.C. Write off the receivable but no separate disclosure is required.
D. No adjustment or disclosure are required.
The answer is D, but I choosen A, anyone can explain for me?
It’s A because it has become a material miss statement as in the financial statements this amount would have been included in both recievelables and/or bad debts before the 01/01/2015
This is an event after the reporting period ended (31.12.14) so must now be changed by the management in the financial accounts TD to reflect the ‘event’ as this will enable the statements to be true and fair in the auditors eyes.
Hope that makes sense or if make sense that is
Answer A is not correct.
Answer D is not correct.
The appropriate treatment is certainly to write off the debt (this is an adjusting event), but no note is needed. The liquidation simply gives evidence about the appropriate valuation of the asset.
The correct answer is C.
Dear sir,
Yes, the correct answer is C, I was typo error to D.
So, when the note is needed to disclose? Any example?
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