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Q.The allowance for recievables brought foward from 2016 was 1200. During 20×7 an irrecoverable debt of 75 required writing off.At the end of the year the closing recievables were 100000 and an allowance of 1.5% is required for recievables.
What is the charge to the statement of profit and loss for recievable expenses for the year?(Do not enter numbers as minus and do not enter commas)
Here the answer is given as 375Sir we normally the amount that appears on SOPL is calculated by getting the new allowance by subtracting irrecoverable debts from the recievables first and then multiplying it by the percentage.Then the decrease in allowance is calculated by subtracting the new allowance from the allowance brought forward.The expense that should appear on the SOPL is then the irrecoverable debt minus the decrease in allowance.
But here sir the new allowance was calculated by multiplying the percentage without removing irrecoverable debts from the recievables.
Why is this merhod followed here sir please help.
Thanks
The question says that the irrecoverable debt was written off during the year. Therefore the closing receivables balance was after having already removed the irrecoverable debt.
Thought so sir. Thank you so much for replying and explaining.
God bless you sir.
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