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Firstly I would like to thank you on this course for the great Lectures John!
I am on Lecture 3 of this topic on example 3 . I am quite confused on this example. What is the other way to solve this example? For Ann’s example, as she has paid her doubtful debt , can we not Dr the Allowance account and what do we credit ? I am confused on this example and I hope you can describe what I should do. On the comments section you have mentioned the following but I do not understand what you mean:
(What you could do if you prefer, is remove her allowance separately – Dr Allowance Cr the expense account. If you do that then when you create the new allowance, then the change needed will be different by the same amount and the net result will be exactly the same. The way I do it is more common in real life, but more importantly is easier and quicker in the exam.)
The way that I do it is the most efficient and quickest way for the exam.
By all means if you prefer then debit the allowance account and credit the irrecoverable debts expense account. However if you do that the existing allowance is reduced and therefore the cost of increasing it to the allowance required at the end of the year is increased. The net effect in the irrecoverable expense account will be exactly the same.
Brilliant, Thanks John. I will try it out now. Thankyou so much. Honestly appreciate the help and I will make a donation to the website if I pass F3 in September so keep a lookout for it 🙂 I hope you are well and keeping safe during this time.
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