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Irrecoverable Debts and Allowances Example 2 – ACCA Financial Accounting (FA) lectures

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Comments

  1. Asif110 says

    November 12, 2020 at 10:32 am

    Sir, Allowance for Receivables will come under what within the Account Equation ?

    Asset + Expense + Drawing = Liabilities + Capital + Sale Income

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    • John Moffat says

      November 12, 2020 at 2:51 pm

      Asset (as a reduction to receivables)

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  2. Sanweyne says

    October 25, 2020 at 2:54 pm

    If 74,000 appears balance sheet, why we need subtract doubt recoverable!

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    • John Moffat says

      October 25, 2020 at 5:23 pm

      We do not subtract recoverable debts – we subtract the allowance for doubtful debts (so that we only end up showing the total we feel certain that we will receive).

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  3. shakir7385 says

    September 8, 2020 at 4:25 pm

    Hi John.

    Why we are required to expense out doubtful debt amount provided that we are creating its allowance as well.

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    • John Moffat says

      September 8, 2020 at 4:43 pm

      The only expense in relation to doubtful debts is the cost of increasing the allowance from what it was at the start of the year to what is required at the end of the year.

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  4. Sourav9271 says

    June 11, 2020 at 12:59 pm

    Sir,shouldn’t we express the entire receivebles in SOFP then subtract BAD DEBTS Then subtract Reserve

    Receivebles. 82000
    (-) irrevocable. 8000
    (-)Reserve. 12560
    ___________________________
    61,440

    Shouldn’t we show all receivables and then subtracting both rather than showing receivbles exclusive of Bad debts?

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  5. tejasbhoir29 says

    November 23, 2019 at 5:04 pm

    I have a doubt.
    Doris currently has a receivables balance of $47,800 and an allowance for receivables of $1,250. She has just received $150 in respect of half of a debt that she had made an allowance against. She now believes the other half of the debt to be bad and wants to write it off. She also wants to increase the allowance for receivables to $1,500.
    What is the total charge to profit or loss in respect to these items?
    Can someone help me with this problem?

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  6. gareisha27 says

    November 5, 2019 at 6:02 am

    Hello, I am seeking clarity on how you arrived at the receivables figure in question one vs question two. The total irrecoverable debt and allowance were deducted from the receivables to get the ending figure in question 1. However, in question 2 why weren’t the figures calculated and added up and subtracted from the balance in the receivables account?

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    • John Moffat says

      November 5, 2019 at 7:31 am

      Are you referring to the examples in the lecture notes that I work through in the free lectures? Because the treatment is the same in both examples. We subtract the irrecoverable debts from the receivables, and in the SOFP we show the final receivables figure less the allowance for receivables.

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  7. ziyaad01 says

    November 3, 2019 at 7:10 pm

    I think there’s a mistake in example 2.
    Specific provision of $10,000 was not subtracted in SOFP.
    Could anybody confirm this please?

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    • John Moffat says

      November 4, 2019 at 9:16 am

      No – it is correct. The allowance in the SOFP is the total of the specific and the general allowances.

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  8. gosiajast2019 says

    June 24, 2019 at 6:54 pm

    hello

    I have a question – do we calculate general allowance after taking off the irrecoverable debts only ( example one) or after irrecoverable + doubtful ? (example 2)
    Are there any rules to follow ?

    Thank you !

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    • John Moffat says

      June 25, 2019 at 7:35 am

      The general allowance is calculated after removing any irrecoverable debts and after subtracting any specific allowance. This is explained in the lectures.

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  9. basiaguziczek says

    November 10, 2018 at 3:46 pm

    Hello, I think in example 2 one figure is missing.
    SOPL Irrecovable and doubtful debts expenses: 12 0560 (doubtful debts expenses + general allowance)+ 8 000 (Irrecovable one, John and Paul )= 20 0560$ in total.

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    • John Moffat says

      June 25, 2019 at 7:36 am

      There is no figure missing.
      The expense in the SOPL is the total of the irrecoverable debts and the change in the allowance.

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    • sbennett says

      December 5, 2019 at 2:06 pm

      basiaguziczek
      You need to omit extra zero (0) you added. It should be $12,560 and $20,560 respectively.

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