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November 15, 2017 at 5:11 pm
Apologies if this has already been covered but I cannot seem to get my head around this part of question 4!
Included in the $50,000 receivables is $1800 cash received which had previously been written off. So when it was previously written off the double entry would have been CR Receivables DR Irrecoverable Debt. So when the cash is received, shouldn’t be double entry be CR Irrecoverable Debt DR Cash?
Is the question saying that when the cash was received it was recorded like so – CR Irrecoverable Debt DR Receivable? Then that is incorrect, so we need to CR the 1800 out of Receivables – Why is it being DR on top of the 50,000 if it’s already included?
Thank for your help!
John Moffat says
November 16, 2017 at 8:49 am
Since it says that the receivables balance includes the 1800, it means that the entry the bookkeeper made must have been Dr Cash Cr Receivables. As you have written, the entry should have been Dr Cash Cr Irrecoverable debts. So to correct the mistake we need to Dr Receivables Cr Irrecoverable debts – this will increase the receivables balance.
I know the wording is a bit confusing – saying it is included does not mean it is part of the total, simply that it is included (i.e. had been entered) in the account in arriving at the current balance. However I am afraid it was the wording in the real exam when this was asked.
March 9, 2017 at 11:31 am
I am able to view any question for f3 chapter 8.please help.which browser should i use?
March 9, 2017 at 2:19 pm
The quiz is working fine. You should ask on the support page – the link is above.
October 3, 2017 at 7:21 pm
me too .. what did you do? i have latest versions of browser and windows.
October 4, 2017 at 6:53 am
Read the previous reply and ask on the support page!
January 16, 2017 at 8:56 pm
Please could you explain the ‘total expense’ line in your workings out in questions 1-3. Why are some of them added and some of them subtracted?
October 24, 2017 at 12:15 pm
if its an increase in allowance you add it in your total expenses as an increase in your allowance is an expense.
if your allowance decreases you subract it in your total expenses as you have reduced your allowance for your receivables…i hope this helped i didnt really know how to explain it properly
October 25, 2016 at 12:17 pm
In question 4 the amount received from Ken 1800, why are we debiting receivables and crediting cash? Normally when we receive cash we debit it right?
October 25, 2016 at 3:20 pm
Who said anything about crediting cash??
When we receive cash from a debt that has been written off, we debit cash and credit the irrecoverable debts expense account.
They should not therefore have credited receivables.
I do suggest that you watch my free lectures on this – they are a complete course for Paper F3 and cover everything needed to be able to pass the exam well.
October 12, 2016 at 10:06 am
I am quite confuse at Q5 for using bad debt $72000 as allowance for receivables, why don’t we use the adjusted figure?
Please explain me,
October 12, 2016 at 10:30 am
Sorry sir, due to my misunderstanding about feedback!
I am now clear?
October 12, 2016 at 2:39 pm
I am pleased that you are now clear 🙂
April 2, 2016 at 5:41 pm
for that 4th question why are we not taking the last transaction
April 3, 2016 at 7:10 am
It was correct to record the cash received in the account.
When there is a doubtful debt, an allowance is created but it remains in receivables.
When the cash is received, we debit cash and credit receivables as usual.
October 12, 2016 at 6:06 pm
You are saying we credit receivables but in answer receivables was not reduced for 2900.00.
So we credit receivables and cancel allowance.
October 13, 2016 at 6:58 am
Receivables would have been reduced when the cash was received and therefore no further adjustment to receivables is needed.
The question is not asking about what we do with the allowance (but what we do is dealt with in full in my free lectures).
When a previously doubtful debt pays us, then we debit cash and credit receivables (and again, this will already have been done during the year when the cash was received).
February 17, 2016 at 11:06 am
yesterday I ask a question but I cant see my comment here
I ask about question number 4 that when we receive cash 2,900 and it was previously allowed. but we received it, cant we add it to our receivable?
February 17, 2016 at 3:05 pm
Your comment is immediately below, and so is my answer to it 🙂
April 19, 2016 at 6:33 pm
In ACCA books its written THE STATEMENT OF FINANCIAL POSITION SHOULD HAVE RECEIVABLES NET ALLOWANCE.you are wrong sir
April 20, 2016 at 8:11 am
I am not wrong – it is you who is obviously not understanding. This question was an actual past real exam question!!
Of course we show receivables on the SOFP net of the allowance, but receivables and the allowance are recorded in two separate accounts.
It might be an idea if you watched our free lecture on irrecoverable debts and allowances before you start making ridiculous comments.
February 16, 2016 at 8:45 am
thanks for best lectures
please explain to me the bellow question.
1- in question number one decrease in allowance is 93,600-57,600= 36000 but in answers it is mistakenly written 38,000.
2- also in question number 4 can you please explain me that why we are considering 2500 as irrecoverable while it is included in receivable 50,000 and why we consider 1,800 received while it is written off. and why we are not considering 2,900 allowance while its received.
February 16, 2016 at 9:28 am
Thank you noticing the mistake in the workings for question 1 – I will have it corrected.
Fortunately the final answer is correct 🙂
For question 4, the 2,500 should not be included in receivables because Mike has gone into liquidation (which means he is bankrupt). It should therefore be regarded as irrecoverable and removed from receivables.
The cash received from Ken should not have been entered into receivables – the entry should be debit cash, credit irrecoverable debts expense. Since it has been entered in receivables it must have been credited, but should not have been. So we need to debit receivables to remove the wrong entry.
When cash is received from a doubtful debt we debt cash credit receivables, so entering it was correct. (If there was an allowance then the debt was doubtful, but it would still be left owing on receivables until it is paid.)
February 2, 2016 at 4:52 am
In question 1, why do you subtract the decrease in allowance from the irrecoverable debt? Wouldn’t the income statement include both numbers? thanks
February 2, 2016 at 4:54 am
Would it be because you credit the bad and irrecoverable debt expense account?
February 2, 2016 at 5:23 am
Never mind, figured it out on my own. There is an increase in the allowance, therefore I debit the allowance by the change in allowance and credit the expense account. Balance of expense account should be 0 and the difference transfers over to the income statement. Similar to one of the scenarios that we worked through in example 3 in the notes. I noticed that most of the questions revolve around increase and decrease of allowance, has that question been typically in the exams?
February 2, 2016 at 7:56 am
I am glad you figured it out. In fact you can deal with it in more than one way – all the matters is that the final expense and the final balance on the allowance are correct. The way I deal with it is the most sensible and the easiest way.
Questions in the exam will almost certainly involve an increase or decrease in the allowance. However, in the exam you cannot possible be asked to prepare t-accounts – it will only be asked in Section A as a MCQ and therefore how you do your workings is not relevant (only the final answer is marked) 🙂
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