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Answers to questions

Example 3

Age of debt Amount
$
Less than 1 month 8,000
1–2 months 3,000
2–3 months 700
More than 3 months 140
––––––
11,840
The required allowance for receivables is equivalent to 5% of the outstanding
receivables balance.

Required:

Calculate the required allowance and post to the ledger accounts.

Example 3: Solution
Irrecoverable debt expense
Dr $ Cr $
Allowance for receivables 592

Allowance for receivables
Dr $ Cr $
Irrecoverable debts
expense 592

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