allowance for receivables in % and specific doubtful debt – net receivables

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March 21, 2019 at 11:24 pm #510018
kingkongsajang
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lecture 1 on irrecoverable debts example 1.
Intuitively,
why do we have to reduce receivables by the specific doubtful debt of $2,800 as well, (after irrecoverable debt has been deducted from receivables) before we calculate the allowance for receivables given by a percentage?
as in why do we have to deduct the specific doubtful debt on top of the percentage doubtful debt? doesn’t the percentage allowance sort of cover for the specific doubtful debt?
is it just a generalisation?
thank you.
March 22, 2019 at 9:09 am #510036
John Moffat
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The specific allowance is for debts that we know are a problem.
The general allowance is because we know that some of the remaining debts are going to be a problem but we don’t know which ones.
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