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Hello sir!
Of the first two examples (FA – chapter 8, example 1 and 2) we did add the irrecoverable debt, doubtful debt, and the general allowances, i.e., SOPL => EXPENSES = IRRECOVERABLE DEBT + DOUBTFUL DEBT + ALLOWANCES
BUT
when the ‘balance’ allowance for receivables was introduced (example 3)
SOPL => EXPENSES = (IRRECOVERABLE DEBT) – (CASH RECEIVED FROM PREVIOUS IRRECOVERABLES) – (CHANGE IN ALLOWANCES)I only understood the “CASH RECEIVED FROM PREVIOUS IRRECOVERABLES” part. Why is there a change in formula for EXPENSE when the question have a balance in ALLOWANCES A/C from previous year?
I hope I haven’t said any blunders, or missed out a portion in the video lectures. Truly thank you for Opentuition.
P.S
Should EXPENSE always be IRRECOVERABLE DEBT + ALLOWANCES (Specific + General)?
Thanks
The total expense is: irrecoverable debts + increase in the allowance for receivables (or less if there is a decrease in the allowance) – any irrecoverable debts recovered.
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