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Hi there. I have a question about double entry of an allowance for receivables. Suppose we have 20.000£ of receivables, but we know that the customer might not pay 5.000£ ( but he/she will pay us 15.000£) . So we need to create an allowance, double entry will be Dr receivables Cr allowance – 5.000£. So why. Why we increase receivables? Customer according double entry have to pay us 25.000£
Thank youThe double entry is not to debit receivables!!
The double entry is debit irrecoverable and doubtful debts expense account, and credit allowance for receivables account.
I suggest that you watch my free lectures on irrecoverable and doubtful debts – the lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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