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Could you please tell me whether all these statements are correct.
1) The bookkeeper make receiveable entry when we sale something to the customer.
Receivable (DR)
Sales (CR)2) When the customer does not pay (let’s say 3 months) the bookkeeper will make allowance for receivable entry.
Irrecoverable debt (DR)
Allowance for receivable (CR)3) BUT at the year-end if he still does not pay then the accountant will make irrecoverable debt entry.
Irrecoverable debt (DR)
Receivable (CR)1. Correct (assuming that the sale was on credit).
2. Probably, but it is up to the company to decide whether or not to create an allowance.
3. That is the easiest and most sensible way as I explain in my lectures) and then to adjust the allowance. Alternatively you can Dr irrecoverable debts expense and Cr the allowance.
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(1) You mean to say that it totally depends on the business to make the allowance or not. It is not necessary?
(2) If the business choose to make the allowance then at the year-end the accountant will make an allowance entry.
(3) If the business choose not to make the allowance then the accountant at year-end will simply regard the uncollectible receivables as irrecoverable debt.
(4) Is it true that all the allowances will be moved to irrecoverable debt at the year-end by the accountant if receivables were uncollected?
(5) What does write-off mean by. Does it mean removing the receivables from the books (just like irrecoverable debt)?
1. I do actually state in my lecture that whether or not they decide to make an allowance (and how much of an allowance to make) depends on both their knowledge of the particular customer and the general economic climate. If they decide that there are doubtful debts then they should make an allowance, but there is no ‘rule’ to tell them what makes a debt doubtful.
2. Either the accountant or the bookkeeper under the instructions of the accountant.
3. If they are certain they are uncollectible, then by definition they are irrecoverable debts. If they are not certain, but doubtful, then they will make an allowance.
4. No that is not true at all.
5.Writing off debts means removing them as irrecoverable.
I really do not believe that you are watching my lectures because all of these points are covered in my lectures. You cannot expect me to type out my lectures again here 🙂
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