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I had the question as follows:
At the beginning of the year, the allowance for receivables was 850. At the year end, the allowance required was 1000. During the year 500 of debt were written off, which includes 100 previously included in the allowance for receivables.
What is the figure to statement of profit or loss for receivable expense for the year?
I worked:
The changes in allowance between the ending and beginning of the year cause the increase required of allowance 150 that effects to receivable expense being up 150.
As well as the writing off debts also make the expense up by 500.
My problem is that what the amount of writing debt including 100 previous allowance for receivable means to expense? Does it effect to receivable expense? I mean Debit allowance 100 and Credit receivable expense 100
And my figure to SOPL for receivable is 150+500-100= 500…but that is wrong…
Please aim to my fault and instruct me how to handle this question well?Please, please watch the lectures, because I do discuss this in them!
There is more than one way you can deal with irrecoverable and doubtful debts – there are no rules, and all the matters is you end up with the correct expense and the correct allowance.
The best, easiest, and safest way to deal with all irrecoverable debts is simply to credit receivables and debit the expense account.
At the end of the year you simply change the existing allowance to the new alliance required.
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