Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › 2 similar question
- This topic has 8 replies, 4 voices, and was last updated 10 years ago by John Moffat.
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- March 17, 2014 at 6:15 am #162475
hi..
1st question..A company receieves news that a major customer has been declared bankrupt. his debt had been allowed for earlier in the year. The entries now required are
A) Dr Allowance for receivable, Cr Trade receivables
B) Dr irrecoverable debts written off, Cr Trade receivables2nd question..
A company has been notified that a customer has been declared bankrupt. the company had been previously made an allowance for this debt. which of the following is the correct double entry to account for this new information?
A) Dr Allowance for receivable, Cr Trade receivables
B) Dr irrecoverable debts written off, Cr Trade receivablesi need only correct answers pls..
March 17, 2014 at 3:10 pm #162500both B
March 17, 2014 at 4:56 pm #162515I don’t know where you found these questions but they are not really valid questions for the exam, and I really don’t understand ‘I need only correct answers’ – I am here to help with problems, not simply give out answers 🙂
The first question says it was allowed for during the year – this could happen but is very odd. Usually the allowance is only decided upon at the end of the year.
Secondly, it is not valid because actually either of the two entries is allowable. I assume that you have watched my lecture in which case you will have heard that there is more than one way of doing the double entries – both perfectly valid – and all the matters is that we end up with the correct expense in the Statement of profit or loss and the correct balance on the Allowance for receivables.
The easiest way of dealing with doubtful debts would be to make entry B in both cases. However A is also valid (depending on what else is done at the end of the year). That is why it is not really a valid question for the exam.
(In case the above confuses you, suppose someone owes us $1000 and because they are doubtful we create an allowance of $1000.
We now write off the debt.
Either:
Dr allowance; Cr receivables (the receivable disappears and the allowance is no longer needed)
Or:
Dr Irr debts expense; Cr receivables (the receivable disappears)
and
Dr Allowance; Cr Irr debts expense (the allowance is removed)In both cases the net expense on the income statement is zero, which is correct.
For this ‘baby’ example, the first method is obviously quicker. However in a full example the second method is much easier and safer (and more relevant to the sorts of questions in the exam).
If you have not watched my lecture, then I suggest that you do.
March 18, 2014 at 8:02 am #162569do u know why i said
‘I need only correct answers’, because i had an mock exam in course where i prepare for F3. this first question is asked me, i answered B. But it was not correct, A was correct. whereas i read the second question in the book of BPP, and i saw the correct answer is B. in this way i kept in my mind, B is correct answer. and also before i asked u this type of question, u answered that correct answer is Dr- Irrecoverble debt expence Cr- receivables. that is why when i saw this type of question in my mock exam , i wrote answer as u said. ( B). But ANSWER WAS WRONG. THEY SAY
A` IS CORRECT. that is why i told i need correct answer, but i need also explanation of course.. now tell me i am wrong or ?March 18, 2014 at 8:34 am #162570But I have answered your question.
Strictly either answer is correct and BPP should not have asked questions like that. The real exam should not ask questions where either answer is possible.
March 18, 2014 at 10:08 am #162574ok. i see.. Thanks for your detailed explanation..
March 18, 2014 at 10:24 am #162575No problem 🙂
March 18, 2014 at 5:15 pm #162602AnonymousInactive- Topics: 0
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Thanks, I also helped, but as well helps me to this company, they have a lot of knowledge
March 18, 2014 at 6:19 pm #162605pieszkkaaa: I have deleted the details of the accountancy practice that you advertised in your email.
If you wish to advertise then ask and we will send you details of our rates.
Otherwise, do not be so silly. We are providing as much help as we can free of charge – do not be childish and abuse this.
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