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11.11 At 1 January 20X1, there was an allowance for receivables of $3,000. During the year, $1,000 of debts
were written off as irrecoverable, and $800 of debts previously written off were recovered. At
31 December 20X1, it was decided to adjust the allowance for receivables to 5% of receivables which
are $20,000.
What is the total receivables expense for the year?
A $200 debit
B $1,800 debit
C $2,200 debit
D $1,800 creditAnswer is D. my question is, the $3000, $1000 and $800 was already adjusted for during the year, reducing the receivables amount to $20,000. but the 5% allowance was not adjusted for because it happened on 32 December 2001. and I don’t understand how it is a CREDIT balance.
Sir is there a problem with this question?
Your organisation sold goods to PQ Co for $800 less trade discount of 20% and cash discount of 5% for
payment within 14 days. The invoice was settled by cheque five days later. Which one of the following
gives the entries required to record BOTH of these transactions?answer is
A PQ Co 640
Sales 640
Bank 608
Discount allowed 32
PQ Co 640working
Sales price 800
Less: 20% trade discount 120
Sale PQ Co Sales 640
Cash discount 5% Discount allowed 32
Cash payment Bank 608
PQ Co 640Sir, 800X 20% is $160. the answer says its $120? how?
The allowance itself is always a credit balance!!
Since the allowance is to be reduced from 3,000 to 1,000 we need to debit the allowance and credit the irrecoverable debts expense account.
Do watch my free lectures!
It is obviously just a typing mistake and should read 160.
However if you follow it all through, they have used 160 in the rest of the workings.
I watched the lectures. Am a little slow in understanding this part.
what you saying is that,
irrecoverable debt $1000
recovered debt ( $800)
31 Dec allowance ( $1000)
TOTAL $1200Then to reduce the allowance we debit $1200 and credit $3000= $1800 credit?
another question Sir
Open tuition chapter 16
Q1) irrecoverable debts written off are a “Decrease in Liabilities”= its a debit and credit Sales account?
Q3) A contra entry of $980 was recorded in the payables ledger control account, but not in the payables ledger. Is this a credit entry in the payables ledger or a debit entry? And why? The answer shows it was deducted from the list of receivables balances and not addedFirst question: No, I am not saying that.
For the irrecoverable debt, we debit the expense account and credit receivables – with 1,000
For the recovered debt, we debit cash and credit the expense account – with 800
For the decrease in the allowance we debit the allowance and credit the expense account – with 1,000.
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