Receivable Expense — OpenTuition Forums

MNmuhammad nayan3y ago

At 1 January 20×1, there was an allowance for receivables of $3,000. During the year, $1,000 of debts were written off as irrecoverable, and $800 of debts previously written off were recovered. At 31 December 20×1, it was decided to adjust the allowance for receivables to 5% of receivables which are $20,000. What figure should be included in the statement of profit or loss as the receivables expense for the year? Ans...... 1800 credit i guess it should be this, allowance = (20000-1000)*5%= 950 different between allowance is =3000-950= 2050 *** receivable expense = 2050+800-1000= 1850 credit please explain if I'm wrong … Thanks.

John MoffatTutor3y ago#1

The irrecoverable debts were written off during the year. Therefore the receivables of $20,000 are after writing of the debts and the allowance required is 5% x 20,000 == $1000. (not 950).

MNmuhammad nayan3y ago#2

So if it's written as, It was decided to write off debts totalling $1000. Then we have to do like, (20000-1000)*5%=950 am i right, sir?

John MoffatTutor3y ago#3

Yes, in that case you would be correct! You have to be really careful to check the wording in the exam :-)

MNmuhammad nayan3y ago#4

thank you soo much Sir John Moffat

John MoffatTutor3y ago#5

You are welcome :-)

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