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: 139.20
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Irrecoverable Debts & Allowances Chapter 8 Test Q2
11y ago#1It 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?
11y ago#3The 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).
Thanx
11y ago#5You are welcome :-)
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