FA Chapter 8 Questions Irrecoverable Debts and Allowances
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Hello, John.
Can you tell me in the fourth question 3 rd part(cash received from Ken) why we must debit receivables? You said in the lecture, when we receive irrecoverable debt from previous year, we debit cash and credit irrecoverable debt expenditure account? What did I miss?
Hi John,
in Q4 shouldn’t we subtract 2900 as that debt was only allowed for and remained in receivables account. So when cash was received there should be entries that close off that 2900 in irr. expense and allowance account, but also cash – debit and receivables – credit?
I agree only for the second entry Dr Cash – Cr Receivables. In the example 3 of the notes, for Ann (which is similar case) said ” Anna is included in the total cash receipts for the year”. This cash was credited to receivables. If Q4 had similar note, we shouldn’t credit receivables because receivables would already be credited.
Hi John,
Good day. For Q3, I would like to understand why don’t I remove the irrecoverable debt from receivables (173,760 – 2,040)?
It is because the question says that the debt had been written off during the year. So the balance at the end of the year is already after having removed the debt..
Ah I see, perfect. Thank you.
hi,regarding 1st question 88800-38000 should be 50800 and not 52800
Thank you.
However the final answer is correct.
The decrease in the allowance should read as being 36,000 (not 38,000).
So the total expense is 88,800 – 36,000 = 52,800.
Hi. Regarding Question nr 4, the point nr (4). In the answer explanation it is written “(4) It is correct from cash received from doubtful debts to be credited to receivables.”, but in the calculation provided under the explanation, the cash received is not included. The calculation provided is “correct figure for receivables = 50000-2500+1800= 49300”, but the 2900 cash received from John (a doubtful debt) is not subtracted from the receivables.
sir can you please explain to me no.4
Did you click on ‘review quiz’ after submitting your answers, because at the bottom then shows the workings for each answer .