- 8 Marks
Question
Funke Limited’s management, based on the prudence principle, evaluated its trade receivables accounts over a period of three years ending on December 31 each year. The following were the extracts from the records of the outcome of the evaluation:
| Year | Trade Receivables (₦) | Bad Debts (₦) | Allowance for Doubtful Receivables (%) |
|---|---|---|---|
| 2014 | 654,000 | 24,000 | 2% |
| 2015 | 745,000 | 18,000 | 2% |
| 2016 | 585,000 | 22,000 | 2% |
The value stated for trade receivables was net of the bad debts but before the allowance for bad debts. There was no allowance for bad debt before 2014.
Required: Prepare the ledger accounts for Bad Debts and Allowance for Doubtful Receivables.
Answer
Bad Debts Account:
Allowance for Doubtful Receivables Account:
- Tags: Bad Debts, Doubtful Receivables, Ledger Accounts, Trade receivables
- Level: Level 1
- Topic: Bad and Doubtful Debts
- Series: MAY 2017
- Uploader: Kwame Aikins