Page 388 - F3 -FA Integrated Workbook STUDENT 2018-19

Chapter 24

Chapter 11

Example 1

Irrecoverable debts

Emre has an accounting year end of 30 June. As part of his management of
trade receivables, Emre performs a regular review of amounts outstanding to
ensure that amounts due are paid promptly and that any amounts identified
as irrecoverable are written off.

Emre had a balance of $254,389 on his trade receivables’ ledger control
account at 30 June 20X5. One that date, he reviewed the amounts
outstanding and identified the following amounts as irrecoverable and which
should be written off.:

1 $2,500 due from Wayne, which was outstanding for four months at the
date of the review. Wayne had recently been involved in insolvency
proceedings as he was unable to pay amounts owing to his creditors.

2 $1,889 owed by Louis which had been outstanding for three months at
the date of the review. Louis has now emigrated and it is extremely
unlikely that Emre will recover this amount.

Required:

State the accounting entries requirred to write off the two amouns
owing and update the ledger accounts.

Solution
Debit Credit

1 Irrecoverable debts $2,500 Trade receivables’ ledger control $2,500

2 Irrecoverable debts $1,889 Trade receivables’ ledger control $1,889

Trade receivables’ ledger control account
Date Details $ Date Details $
30 June Balance b/f 254,389 30 June Irrecoverable 2,500
debts exp
Irrecoverable 1,889
debts exp

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