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A company has been notified that a customer has been declared bankrupt. The company had previosuly provided for this doubtful debt. Which of the following is the correct double entry?
A) Dr irrecoverable debts Cr receivables ledger control account
B). Dr allowance for receivables. Cr Receivables ledger control accountthe correct answer by Kaplan book is A. I do not understand that. In that case the company would recognise twice the expense, once in the previous exercise when made the allowance for that doubtful debt and another if the correct double entry is A.
Many thanks in advance for your helpKeep in mind that when making entries for allowance, it is only when the allowance is increased or decreased that the double entry is made.
I think this is the key that makes it all work out but I’m revising this now so maybe can give better answer a bit later.
The prevously dount entry should be Dr irrecoverable debts Cr allowance for receivable but after the customer went bankrupt the entry should be Dr irrecoverable debts Cr receiables
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