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Irr debts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Irr debts

  • This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • September 13, 2016 at 3:30 pm #340343
    firelion28
    Member
    • Topics: 159
    • Replies: 83
    • ☆☆☆

    In BPP revision kit it says – the allowance for receivables is to be increased to the equivalent of 5% of trade receivables. The trade receivables are 900, irr debts are 150 previous year allowance is 40.

    I did – 900-150 = 750

    THis year allowance = 0.05 % x 750 = 37.5

    Decrease in allowance is 2.5

    TOTAL expense is 147.5

    However what BPP did is as follows.

    Rec as per trial balance 900
    allowance required 900000×5%=45
    allwoance oer trial balance =40
    Increase 5
    Irr debts written off 150
    TOTAL irr expense 155

    I think from whatever I learnt from your lectures the way bpp did is wrong

    September 13, 2016 at 6:01 pm #340358
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    The question does not appear to be in the current edition of the BPP Revision Kit and so I cannot check the wording.

    However almost certainly it will say that the 150 was written off during the year (or that it appears in the trial balance, which means it was written off during the year).
    In which case the 900 will already be after removing the 150, so you don’t subtract it again when calculating the allowance.

    September 13, 2016 at 6:06 pm #340361
    firelion28
    Member
    • Topics: 159
    • Replies: 83
    • ☆☆☆

    Yes sir, it was from the trial balance. what does that mean though?

    September 13, 2016 at 7:10 pm #340365
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    There can only be a balance on the irrecoverable debts account if the entry has already been made (and therefore the receivables have already been reduced).

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