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Dorris has a receivable balance of 47800, allowance for receivable of1250. She received 150 against half the debt she provided for and half was written off. Allowance maintained at 2% receivables.
What is the total charge to statement of profit and loss.
I have the answer / ledger enteries in the text answers but I still cannot work out how the allowance figure is calculated?
I assume from the way you have typed the question that the receipt of 150 and the writing off of the other 150 both occurred during the year, and therefore the balance of 47,800 is after dealing with them and is the receivables balance at the end of the year.
In which case the allowance required at the end of the year is 2% x 47,800 = 956.
Since the allowance is currently 1,250, it needs reducing by 1,250 – 956 = 294
Therefore the expense for the year in the SOPL is a negative expense of 294.
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Thank you sir. Yes I have seen the videos. I will go through them again to clear my doubts. Many thanks.
You are welcome 🙂