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Sir i am not able to understand illustration 1 incomplete records in kaplan study text:
The closing trade receivables figure at 31 july 2018 taken from prior year’s statement of financial position was 98425 you have reviewed the list of receivables and calculated that receivables outstanding at 31 july 2019 total 107550 after discussion it was determined that prior to year end 1500 of trade receivables were written off as irrecoverable .this has not been reflected in the list of memorandum to assist one of your book keepers has reconciled the cash book with bank statement for the year and has calculated 245675 was received from customers out which 53435 was cash sales .the remainder constituted receipts from credit customers. What was the sales revenue for the year?
Sir kindly help me find the answer as i am not able to understand kaplan’s solutionThe cash received from credit sales was 245675 – 53435 = 192240.
On the receivables control account there is a debit balance brought forward of 98425. On the credit side there will be the irrecoverable debts of 1500, the cash received of 192240, and the closing balance carried forward of 107550. The missing figure on the debit side is 202865, and this must be the credit sales.
Add this to the cash sales of 53435 and the total is the total sales revenue.
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Sir but irrecoverable debts are not included in list of receivables so shouldn’t we subtract 1500 from 107550 and then show 1500 on credit side? As we used 107550 from memorandum and it didn’t included 1500…so we should subtract 1500 from 107550 ?
So on debit side 98425 will come
On credit side 192240+ 1500 +106050 will come and final balance of credit sale
201365?It depends what ‘list memorandum’ is supposed to mean. As it stands it doesn’t mean anything (and is not a standard term).
Given that the question says that the 1500 was written off before the year end, then the 107550 is presumably already after removing the irrecoverable debt.What does the answer in your book do?
Sir the question states that 1500 was left to be deducted from 107550
The answer in book shows: 98425 debit side
And credit side:192240+106050
I miswrote the question sir it was
” shortly prior to year end 1500 of irrecoverable were TO BE written off however they were not removed from 107550″
So i guess they should show 1500 as irrecoverable debt on credit side
So that credit side : 192240+106050+1500Yes. It seems as though there may be a mistake in your book because the credit side should be as you have typed in your last line.
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