FA – L1 – Q29 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kwame Asare.

Question

The allowance for receivables brought forward on 1 January in the books of Kwame Asare was GH¢86,000. Trade receivables at 31 December amounted to GH¢2,840,000 and irrecoverable debts to be written off totalled GH¢115,000. Kwame Asare has estimated that the closing balance on the allowance for receivables account should be 5% of accounts receivable.

Required:
Write up the irrecoverable debts expense account and the allowance for receivables account.

Answer

Irrecoverable debts expense account

Date	Details	GH¢	Date	Details	GH¢
31/12	Receivables (write-offs)	115,000	31/12	Statement of P or L	171,000
31/12	Allowance for receivables	56,000
		171,000			171,000

Allowance for receivables account

Date	Details	GH¢	Date	Details	GH¢
31/12	Receivables (write-offs)	115,000	01/01	Balance b/d	86,000
31/12	Balance c/d	142,000	31/12	Irrecoverable debts expense	56,000
				(increase in allowance)
		257,000			257,000
			01/01	Balance b/d	142,000

Tags: Allowance for receivables, Bad Debts, Doubtful debts, Financial accounting, Ledger accounts
Level: Level 1

Topic: Bad and doubtful debt

Uploader: Samuel Duah