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North Co has a receivable balance at 31 Oct 20X7 of $456330. The accountant at North is preparing the financial statements for the Y/E 31 Oct 20X7 and must account for the following.
1) A balance owed by South Co. OF $780 is deemed irrecoverable and must be written off.2) The brought forward receivable allowance is $15255. North Co have a policy to provide for 5% of the outstanding receivables balances.
3) A payment of $450 from East Co has been received on 30 Oct. The payment relates to a balance that had previously been written off as irrecoverable by North Co.
What value for receivables should appear in the SOFP of North Co at 31 Oct 20X7?
Ans $432772.50What is the total amount that should appear in the SOPL?
Although the workings are given, please can you help me understand the 3rd transaction:
The book keeper must have Dr the Cash a/c and Cr the Receivables a/c with $450 of irrecoverable debt written off earlier.
Therefore, i have Dr Receivables a/c and Cr Irrecoverable & Doubtful Debts Expense a/c with $ 450.In the book they have Dr Cash a/c and Cr Irrecoverable & Doubtful Debts Expense a/c.
I understand your logic, but in this question it does not say that the bookkeeper has actually done anything with the 450 received. It says at the beginning that the accountant must account for the following transactions, which suggests that the bookkeeper has not entered it anywhere.
So it is up to the accountant to make the correct entry, which is Dr Cash Cr Irrecoverable debts expense.
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