Page 165 - F3 -FA Integrated Workbook STUDENT 2018-19

Receivables

Example 2

Allowance for receivables

Continuing with the example of Emre reviewing his receivables as at 30 June
20X5, he is now considering the allowance for receivables required. The
balance carried forward on the allowance for receivables ledger account as at
30 June 20X4 was $3,700 and Emre updates the allowance for receivables
annually.

During Emre’s review of receivables as at 30 June 20X5, he identified the
folllowing amounts which had been outstanding for three months, but he was
still hopeful that the amounts due would be recovered:

1 $2,400 due from Jordan.

2 $1,800 due from Adam.

Required:

Calculate the amount required for the allowance for receivables and
state the accounting entries required to ensure that the allowance for
receivables is correctly stated as at 30 June 20X5.

Balance off each ledger account

Solution

Amount required for allowance for receivables = $2,400 + $1,800 = $4,200

Increase in allowance for receivables = $4,200 – $3,700 = $500

Debit Credit
Irrecoverable debts $500 Allowance for receivables $500

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