- May 3, 2020 at 7:02 pm
Dear Mr. John,
These are the question from :Practice question , need your little help , sort explanation.Finding hard to understand.
1. At 31December 2013 a company had receivable $140000 and allowance for receivable $7000
At 31 December 2014 they had receivable $ 185000
It was then decided to write off a debt $ 4000 as irrecoverable and to have general allowances of 5% of remaining debts .
What irrecoverable and doubtful debt expenses in the SOPL ?
Question for clarification to get it right….
Why at 31 December 2013 receivable $ 140000/- did not accounted for but $ 7000 taken as closing allowances?
2. At 31 December 2005 the ledger X co include $ 5376 allowances for receivable during the year ended 31 December 2006 irrecoverable debts $ 2040 were written off and receievable balance $ 173760 and company wished to carry forward a general allowances of 2%.
Question : Why irrecoverable debts $ 2040/- not deducted from receivable ?
3. At 1 july a 2007 a company allowances for receavble was $ 48000 . at 30 june 2008 trade receiavable amounted $838000 .it was decided to write off $ 72000 of these debts and adjust the allowances for receivable to $ 60000/-
What are final amount in SOFP, Answer – 838000-72000=76600
Question: why there is no allowance of receivable for both not accounted for?
VictorMay 4, 2020 at 9:30 am
1. The receivables at the start of the year are of no relevance. What matters is the receivables at the end of the year in order to be able to calculate the allowance needed at the end of the year. The expense in the SOPL is then the cost of the irrecoverable debts together with the change in the allowance over the year.
2. The question says that the 2040 were written off during the year, and therefore the balance of 173760 is already after removing the 2040.
3. The amount in the SOFP is always the receivables at the end of the year less the allowance at the end of the year. The allowance at the start of the year is only relevant when calculating the expense in the SOPL.
Have you watched my free lectures on irrecoverable and doubtful debts? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.May 4, 2020 at 7:06 pm
Dear Mr. John,
Thank you ,Is it the month of September for exam instead of june-2020?
VictorMay 5, 2020 at 9:11 am
Paper FA is an “on-demand” exam and you arrange the date with the company where you intend to take the exam. When it is available depends on the company you choose.
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