- This topic has 5 replies, 2 voices, and was last updated 10 years ago by
.
- Posts
Sir, here is the 11.12 from Bpp P&R kit:
At the beginning of the year, the allowance for rec. was 850. at the year end, the allowance required was 1000. During the year 500 of debts were written off which includes 100 previously included in the allowance for rec.
what is the expense for the year?
A: 1500
B: 1000
C: 650
D: 550
Ive chosen A because 850 is the charge to SPL because Dr Exp Cr Allowance then +shift of 150, then +500 (400 as Dr exp Cr TR; and 100 Dr expense Cr TR) so 1500.
BUT the answer says 650 leaving out the 850 exp of the original allowance…IDK what to do…Q:and again 11.18:
at January 20×4, Tartar Co had total receivables of 380,000. A specific allowance of 20,000 had been made for a business customer, Drab. The general allowance for receivables was 2.5%. During the year, Drab went out of business owing Tartar Co 28,000., none of which is expected to be recovered. At 31 December 20X4, Tartar had total receivables of 420,000. There were no specific allowances but the general allowance for receivables was increased to 3%.
What charge in the SPL for the year to 31 Dec for the allowance for TR and Irr.debts?A:The answer is given again contradicts with mine. I did DRs to EXP A/C: 20000 (creating the spec allowance)+8000 (the difference customer owes as irrecoverable now)+9000 (creating the general allowance) and Cr 16400 (the Negative exp)
The answer is calculated by : 28000 – 16400…IDK it ruins my knowledge of creating allowances in EXP a/c, sir. Help!Question 1:
The expense for the year is always the cost of any irrecoverable debts (here 500) plus the change in the allowance (here an increase of 150 (1000 – 850)) which gives a total of 650.
There is no need to waste time messing around with the allowance during the year. If you want to (but it confuses and is never necessary), then you could say that only 400 of the irrecoverable is an expense this year. The other 100 comes off the opening allowance, which means the allowance then needs to increase from 750 to 1000 – an increase of 250. Again, the total expense is 400 + 250 = 650.
It will help you to watch the lectures.
Question 2:
It is the same idea as the first.
The total allowance at the start of the year was 20,000 + 2.5%(380,000-20,000) = 29,000.
The total allowance required at the end of the year is 3% x 420,000 = 12,600The expense for the year is always the cost of irrecoverable debts (28,000) plus the change in the allowance (a decrease of 16,400 (29,000 – 12,600).
So a total expense of 28,000 – 16,400 = 11,600
F3 is not a double entry exam – there are very few debits and credits tested – and to do this using t-accounts takes too long and is confusing. You will be under huge time pressure in the exam. The expense is always the cost of any irrecoverable plus the change in the allowance.
Do watch the lecture and also the revision lecture.
F3 is not a double entry exam but for me it is much easier to draw lil t a/c and pop in the numbers.
#The expense for the year is always the cost of irrecoverable debts plus the change in the allowance. – that’s great tip!! 1 rule and that’s it. no problem. Why dont you include rules like that in the notes? it is so helpful…
- You must be logged in to reply to this topic.