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Hi John,
Why in this question the answer takes the 2% of $173760 and not from $173760 – $2040?
At 31 December 2005 the ledger of X Co. included a $5,376 allowance for receivables. During the year ended
31 December 2006 irrecoverable debts of $2,040 were written off. Receivables balances at 31 December 2006
totalled $173,760 and the company wished to carry forward a general allowance of 2%.
The total charge for irrecoverable debts and change in allowance for receivables in the 2006 Statement
of Profit or Loss is:
Ans: 139.20It is because the debts were written off during the year, and so the 173,760 at the end of the year is after removing the irrecoverable debts.
Sir i saw a question were there was Receivables at the begining were 280 000 irrecoverable debts written off 8000 and allowance for receivables wer 140 000 and allowance for receivables 15% i dont remember how the question was asked but were suppose to calculate what the irrecoverable expense would be.How can you solve this?
The irrecoverable debts expense is the total of any irrecoverable debts written off plus or minus the change in the allowance for receivables (plus if the allowance increases; minus if the allowance decreases).
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