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Fatima’s receivables @ 31 May 20X7 were $723800. The balance on the allowance for receivables account 1 June 20X6 was $ 15250. 31 May 20×7 allowance for the receivables is 1.5%
On 14 May fatima received $540 during 31May 20X6Closing allowance—10857(723800*1.5/100)
Opening allowance—15250
decrease in allowance—4393My question here is that can i recognise here opening allowance(15250) in Irrecoverable debt account? we have in fact 15250 ID and we deduct 4393 and 540 due to refund and decrease in allowance? 4393 and 540 will go to credit side of p/l and 10317(15250-540-4393) to debit side to p/l?i this right?
Dr allowance for receivables–4393
Cr irrecoverable debt—–4393Debit Cash-540
Credit irrecoverable debt-540The balance on the allowance account does not appear in the SOPL, it only appears in the SOFP as a reduction in receivables.
The entry for the change in the allowance is Dr Allowance 4,393 and Cr Irrecoverable debts expense account 4,393
no no dear tutor you did not understand me i would like to tell you that if i have 15250 allowance for receivable does not mean it is also irrecoverable debt?
Design Co has a total balance for trade receivables of $25,000 at the year end. A review of the
receivables balances highlights that one of its customers, Mann Co, has gone bankrupt. Design Co is owed $4,000 by Mann Co for design work done during the year. This debt is now considered irrecoverable.let us assume this example
Debit irrecoverable debt-4000
credit trade receivable 4000does not irrecoverable debt here create allowance for receivable balance if ID increases AFR balance?
why not also?
DR ID-4000
CR AFR-4000I did not misunderstand you.
The allowance for receivables is because there are doubtful debts – they are not irrecoverable debts.
And as regards your Design example, the irrecoverable debt is written off as per your first entry. There is no allowance for receivables.
Why are you asking these questions given that you have passed Paper FA?
I do suggest you watch my free lectures on irrecoverable and doubtful debts.
Dear Tutor strengthening my some weak parts in FA as wel as FR for transition SBR
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