- 10 Marks
FA – L1 – Q32 – Bad and doubtful debt
Write up irrecoverable debts and allowance for receivables accounts for three years, including financial statement extracts.
Question
Nana makes allowance for receivables at varying percentages based on statistical analysis and the level of outstanding trade receivables. The result of this policy for the last three years is as follows.
| Year to December | 20X6 | 20X7 | 20X8 |
|---|---|---|---|
| GH₵(000) | GH₵(000) | GH₵(000) | |
| Trade receivables at the year end (before adjusting for any irrecoverable debts) | 196,860 | 151,020 | 216,020 |
| Estimated irrecoverable debts (accounts in liquidation) | 1,860 | 1,020 | 6,020 |
| Allowance for receivables (%) | 5% | 6% | 7.5% |
The allowance for receivables at 1 January 20X6 was GH₵10,000.
Required
Write up the irrecoverable debts expense account and allowance for receivables account for each of the three years. Show the relevant extracts from the statement of financial position for each of the three years.
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