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Obtain a breakdown of the allowance for trade receivables, recalculate and compare to any potentially irrecoverable balances to assess if the allowance is adequate.
Maam I don’t understand this SP, find this very muddling, can you pls explain it if possible?
many thanks in advance
“Obtain a breakdown of the allowance for trade receivables [assumed FA knowledge – may be made up of specific allowances (e.g. 100% of debts > 6 months, 50% or debts > 3 months) and/or “general” allowances (e.g. % of remaining total)], recalculate and compare to any potentially irrecoverable balances [as indicated by aged debtor listing/results of review of after-date cash receipts] to assess if the allowance is adequate [i.e. sufficient/not understated].”