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hi john,
i have this doubt
at the beginning of the year the allowance was 850 and at the year end the allowance required is 1000. during the year 500 of debts were written off which includes 100 previously included in the allowance of receivables.
what i did was 150 ( increase in allowance) + (500-100) as we have already charged that allowance and got 550, but the answer in bpp is 650 and i do not understand why we double charge??
also what is enttry if a bankrupt customer for whom we created an allowance goes bankrupt. i know it is cr receivables but well, what do we DEBIT?
hope u can helpthanks
There is more than one way of doing the entries, which both give the same answer.
The best way (and the way I work through in my lectures) is:
The total expense is:
Increase in allowance = 1,000 – 850 = 150
Cost of irrec debt = 500
So total cost = 650For irrecoverable debt, Cr Receivables and Dr irrec debt expense account.
If you prefer, then for irrecoverable debt, Cr Receivables Dr allowance account.
This means the allowance is now only 850 – 100 = 750
Increase in allowance = 1000 – 750 = 250
Other irrec debts = 400
Total cost = 650also what is enttry if a bankrupt customer for whom we created an allowance goes bankrupt. i know it is cr receivables but well, what do we DEBIT?
hope u can help
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