• Skip to primary navigation
  • Skip to main content
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
    • BT
    • MA
    • FA
    • LW
    • PM
    • TX-UK
    • FR
    • AA
    • FM
    • SBL
    • SBR
    • AAA
    • AFM
    • APM
    • ATX
    • Dates
    • What is ACCA

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

ACCA F3 Irrecoverable Debts and Allowances Example 1

VIVA

View ACCA F3 / FIA FFA lectures Download F3 notes


Reader Interactions

Comments

  1. rvk9 says

    March 25, 2018 at 2:45 pm

    could you please give me journal entry for receivables becoming irrecoverable earlier allowance made for that amount…?

    Log in to Reply
    • John Moffat says

      March 25, 2018 at 6:39 pm

      I deal with this in the lectures!!
      Have you not watched the rest of the lectures on this chapter ? 馃檪

      Log in to Reply
  2. shannonmcnamara says

    February 12, 2018 at 8:14 pm

    In your example one run through, we deducted 2500 and 1600 for Irrecoverable then another 2,224 for the 4% allowance – when redoing for layout, we deducted the total of these at 5,024.

    On the SOPL, you had expense of 2500 + 1600 + 5024, is this not double counting the Irrecoverable Debt? Why do we not have expense of 5,024?

    Log in to Reply
    • John Moffat says

      February 13, 2018 at 7:43 am

      The 5024 is the total of the general allowance of 2224 and the specific allowance for Z of 2800. It does not include the irrecoverable debts and there is no ‘double-counting’.

      I do suggest that you watch the lecture again (and I assume that you did print out the free lecture notes and therefore have the example in front of you?).

      Log in to Reply
  3. mehmetsgashi says

    July 23, 2016 at 9:07 pm

    Good evening Sir,

    At 30 June a company’s allowance for receivables was $93,600. At 30 June 2008 trade receivables totalled $1,240,800. It was decided to write of debts totalling $88,800, and to adjust the allowance for receivables to equivalent of 5% of the trade receivables based on the past events.
    What figure should appear on the statement of profit or loss for the year ended 30 June 2008 for these items?
    My answer is $57,600, but the correct one is $52,800. Could you please explain? What am I missing?

    Log in to Reply
    • alescurti says

      December 7, 2016 at 8:45 am

      hi

      the receivable after write off are 1,152,000.00
      the allowance is 93,600.00
      company is adjsutin for 5% of receivable

      then 1152000*0,05= 57,600 therefore we need to reduce the allowance for 93600-57600 = 36000 (reduction of liabilty, take it as income);
      then you need to consider that during year you have written off 88,000 (expense)
      in the P/L the total expense will be (88000)-36000=52,800.

      always remember if any writeoff has been done during year this need to be included in the expense fro the current year.

      hope is clear now

      Log in to Reply
  4. Hussain says

    November 21, 2015 at 12:15 pm

    You said ” If there is decrease in assets, its an expense.” Please explain how?

    And why we will treat them as expense.

    Log in to Reply
    • Hussain says

      November 21, 2015 at 12:54 pm

      Previously you told that expense cost of running business

      Log in to Reply
      • John Moffat says

        November 21, 2015 at 1:43 pm

        Here we are talking about receivables.
        If you reduce the value of receivables you are reducing the value of an asset, but at the same time it is costing the business to reduce the value which is an expense.

        I do suggest that you go back and watch the earlier lectures – especially the lectures that go with Chapter 2 of the lectures notes. These look at the dual effect of transactions which is a fundamental principle of accounting and effects everything that follows.

  5. Tamas says

    September 27, 2015 at 9:33 am

    Good Morning Tutor,

    I have a question about irrecoverable debts and allowances as it is not clear.
    At 1JAN04 Tartar Co had total receivables of $380,000. A specific allowance of $20,000 had been made for a business customer, Drab. General Allowance for receivables was 2.5%. During the year, Drab went out of business owing Tartar Co $28,000, none of which is expected to be recovered. At 31DEC04 Tartar had total receivables of $420,000. There were no specific allowances but the general allowance for receivables was increased to 3%.

    My question is, why do they calculate the GA as 3% x 420,000 = 12,000. I thought we have to deduct the irrecoverable debt first like 420,000 – 28000 x 3 .

    (Correct answer is $11,600)

    Thank you for your help.

    Log in to Reply
    • John Moffat says

      September 27, 2015 at 10:00 am

      It is because the question has assumed that the 28,000 had been written off during the year and therefore the 420,000 was after removing the 28,000.

      (If the question had said that the balance was 420,000 but then they discovered at the end of the year that 28,000 was irrecoverable, then you would have subtracted the 28,000 before calculating the 3%)

      Log in to Reply
      • mehmetsgashi says

        July 19, 2016 at 11:42 am

        Hi John,
        Thanks for your explanation!
        But, indeed, I’m trying in many ways to find out how do you agree with the right answer ($11,600). Could you please explain how do you calculate it?

  6. ambrose says

    November 7, 2014 at 10:37 am

    Good Day my Tutor!
    For record purpose and credit worthiness of customers dont u think that Irrecoverable (Bad) Recovered Debt A/c should be debited (kept) instead of crediting Irrecoverable and Doubtful Debt A/C?

    Log in to Reply
    • John Moffat says

      November 7, 2014 at 10:58 am

      A business may well want to keep a record of creditworthiness etc, but that has nothing to do with the ledger accounts. The ledger accounts are there to enable us to calculate the profit and to prepare a SOFP at the end of the year.

      We cannot show money as owing to us if it is irrecoverable , and it must be removed. CR Receivables; DR Irrecoverable debts expense.

      Log in to Reply
      • ambrose says

        November 7, 2014 at 11:08 am

        I was actually referring to Paul in example 2 & 3. In example 2 Paul’s debt was irrecoverable & in example 3 he paid 2,200 from the 3,000 that was irrecoverable. My question was why don’t we credit an A/c called Bad Debt Recovered A/c with the 2,200 instead of crediting Irrecoverable and Doubtful Debt A/c?

      • John Moffat says

        November 7, 2014 at 11:14 am

        You can if you want, but in exams we do not bother opening a new account. We just CR irrecoverable debts and treat it as a negative expense.

      • ambrose says

        November 7, 2014 at 11:33 am

        Thanks a lot! I’m proud of you and ever since i discovered your site i have told several others about it. You are a gift to existing and prospective accounting students and practicing accountants.

  7. ambrose says

    November 7, 2014 at 10:36 am

    Good Day my Tutor!
    For record purpose and credit worthiness of customers dont u think that Irrecoverable (Bad) Recovered Debt A/c should be debited (kept) instead of debiting Irrecoverable and Doubtful Debt A/C?

    Log in to Reply
  8. nita says

    May 26, 2014 at 3:33 pm

    I have exame in 3 days. Last year they didn鈥檛 included: an aged receivables
    analysis and purpose of credit limits..Do the include now?

    Log in to Reply
    • John Moffat says

      May 26, 2014 at 5:15 pm

      They are in the syllabus (and they were in the syllabus last year).
      Whether they will be asked in your exam I have no idea. Sorry.

      Log in to Reply
  9. Roisin says

    March 21, 2014 at 9:41 am

    Good Morning,
    I understand how to apply this. However, some questions do not seem to specify if the Irrecoverable debt has been written off, or trade receivable is net of irrecoverable debts.So when calculating the entry on P/L, I am not sure whether to deduct the Irrecoverable debt and then caluclate the Allowance based on the balance, plus the irrecoverable debt; or to calulate on the total TR. EG.
    Irrecoverable debts are $5000. Trade Receivables are $120,000. An allowance of 5% is required. What is the entry for Irrecoverable debts and allowance for receivable on the P/L?
    a.$5000
    b.$11000
    c.$6000
    d.$10750
    In the first instance : ((120,000 – 5000 ) x 5%) + 5000 = 10750 (a)
    or
    5000 + (120,000 x 5%) = 11,000

    The correct answer is b. I was torn between both and opted for d, But I do not want to lose 2 marks for this! How do I know when to apply the caluculation to the total figure, or net of irrecoverable debts. There seem to be question of both types.
    Many Thanks John.

    Log in to Reply
    • John Moffat says

      March 21, 2014 at 10:45 am

      In the exam they will make it clear, but you have to be very careful with the wording. If it says that they ‘had been written off’ or that ‘they were written off during the year’ then they have already been removed from the balance. If it says ‘it was decided to write off’ then they have not yet been removed.
      Hope that makes sense 馃檪

      Log in to Reply
      • Roisin says

        March 21, 2014 at 11:52 am

        Thank you John. I hope it will be clear in the exam. The question above did not seem clear and it was from BPP. I will read the question very carefully regardless, and hope for the best!

  10. Yvonne says

    February 25, 2014 at 3:15 am

    Hallo ,please help where can I get examples to practice on topics

    Log in to Reply
    • John Moffat says

      February 25, 2014 at 7:26 am

      You need to get a Revision/Exam Kit from one of the approved publishers. They are full of practice questions.

      Log in to Reply
  11. Hafiz says

    January 6, 2014 at 10:45 am

    thanks for lectures

    Log in to Reply
  12. jenjen says

    December 6, 2013 at 1:07 pm

    can someone please help with this question
    Venus acquired 75% of mercury co $100000 $1ordinary share capital on Nov 1 2011. the consideration of mercury$2 cash per share and $1 share in Venus for every 1share acquired in mercury co.
    Venus co share have a nominal value of $1and a fair value of and$1.75.the fair value of nci was $82000 and fair value of of net asset was$215500.what should recorded as goodwill acquisition if Venus co in the consolidated financial statement

    Log in to Reply
    • John Moffat says

      December 6, 2013 at 1:13 pm

      Calculate the total that Mercury was valued at – the cash plus the fair value of the shares in Venus plus the fair value of the NCI.

      Subtract from this the fair value of the new assets.

      The difference is the goodwill arising on consolidation.

      (Please do not ask questions about consolidations under a lecture on irrecoverable debts. Either ask in the F3 general forum, or in the F3 Ask ACCA Tutor forum)

      Log in to Reply
  13. kedescia says

    November 30, 2013 at 5:54 pm

    Good Afternoon
    I am asking for your assistant for the question below. I state the answer I got but I am not sure how they got the correct answer.
    3. Apple owns her own business selling dolls to stores. At 30 June 2008 she had the following balances in her books:
    Trade receivables: 62,900
    Allowance for receivables: (900)
    A balance of $2,000 due from X Co is considered irrecoverable and is to be written off. Y Co was in financial difficulty and Apple wished to provide an allowance for 60% of their balance of $1,600. She also decided to make a general allowance for receivables of 10% of her remaining trade receivables.
    What was the allowance for receivables in her Statement of Financial Position at 30 June 2008?
    ? $6,890 but this is the correct answer
    ? $6,954 This was the answer I selected
    ? $7,090
    ? $7,530

    Log in to Reply
    • jenjen says

      December 6, 2013 at 1:58 am

      anyone could help i am lost with this question as well

      Log in to Reply
    • John Moffat says

      December 6, 2013 at 8:26 am

      The allowance is (60% x 1600) + (10% x 59300) = 960 + 5930 = 6890

      The 59300 is 62900 (current receivables) – 2000 (irrecoverable) – 1600 (part of which is specifically allowed) = 59300
      59300 are the remaining receivables not otherwise dealt with.

      Log in to Reply
      • jenjen says

        December 6, 2013 at 12:58 pm

        thanks much never thought of taking out the full 1600 first

      • rustamrakhmatov27 says

        May 18, 2015 at 11:05 pm

        sir, why we deducting the full 1600?

      • John Moffat says

        May 19, 2015 at 7:53 am

        If we have decided we need a specific allowance on part of the 1600 then we must have investigated the amount and decided that we think the rest of the receivable is no problem
        Therefore we do not need to have a general allowance on any of the 1600.

      • sukhdebacca says

        May 2, 2016 at 10:14 pm

        Why we don’t deduct Allowance for receivables: (900) from Trade receivables: 62,900

      • John Moffat says

        May 3, 2016 at 7:46 am

        Because there is a debt to write off and the allowance needs changing. Also the receivables and the allowance are two separate accounts.

      • aw16 says

        July 2, 2016 at 1:35 pm

        Sir, I understand $900 should not deduct from Allowance from Trade Receivables. However, since it is the starting figure as at 30 Jun 2008, why we did not add it in the $6890?

      • John Moffat says

        July 2, 2016 at 7:21 pm

        Because 6890 is the figure that we want to end up with.

« Older Comments

Leave a Reply Cancel reply

You must be logged in to post a comment.

Copyright © 2025 路 Support 路 Contact 路 Advertising 路 OpenLicense 路 About 路 Sitemap 路 Comments 路 Log in