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irrecoverable debt and allowances

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › irrecoverable debt and allowances

  • This topic has 6 replies, 2 voices, and was last updated 1 year ago by kennigara.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • April 18, 2021 at 11:44 am #618084
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    Dear Tutor I will have some specific questions on this topic despite i passed this one just for in-depth knowledge

    XYC co has a balance of trade receivable pf $250000. It provides a specific allowance of 60% on a debt of $20000.General allowance 2%.charge to p/l?

    TR–250000
    IR debt–(20000*0,4)=8000
    Doubtful debt-(20000*0.6)=12000
    revised TR===230000
    general allowance==(230000*0.02)=4600
    revised tr====225400

    why (4600+12000)=16400 is charged to p/l not 8000?

    April 18, 2021 at 11:49 am #618085
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    also except for allowance for receivable T account do I have to create specific allowance T account seperately then transfer to AFR such as here SA is 12000

    debit ID-12000
    CR SA-12000
    in order to AFR balane i give the following journal entry
    and I keep doubtful debt under Irrecoverable T account is this right?
    in this right?

    debit SA–12000
    Credit AFR-12000

    Debit ID-4600

    Credit AFR-4600

    April 18, 2021 at 2:35 pm #618119
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51599
    • ☆☆☆☆☆

    There is a specific allowance of 60% x 20,000 = $12,000.
    The general allowance is 2% x (250,000 – 20,000) = $4,600.

    Therefore the total allowance required is $16,600.

    Assuming there is no allowance brought forward from last year, then the cost of creating the allowance is $16,600.

    The entry is Dr Irrecoverable and Doubtful debts expense account and Cr Allowance for receivables account.

    (However you are not asked to prepare t-accounts in the exam)

    April 18, 2021 at 3:01 pm #618123
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    Dear tutor does not Irrecoverable debt increase the allowance for receivable here why here is not added over 16600?

    April 18, 2021 at 3:17 pm #618128
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51599
    • ☆☆☆☆☆

    There is no mention of there being an irrecoverable debt in the question you typed!!!

    April 18, 2021 at 7:49 pm #618145
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    yea understood now great

    April 18, 2021 at 10:36 pm #618150
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    Dear Tutor sorry for this one

    It provides a specific allowance of 60% on a debt of $20000. if 20000 amount’s 12000 is specific allowance but what is the remaining amount (8000) considered?

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