Allowance for receivables

FA – L1 – Q35 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance accounts for three years with specific and general allowances, including financial position extracts.

Question

In her first year of trading to 31 December 20X7, Akosua made credit sales of GH₵200,000 and received GH₵150,000 from credit customers.
At the end of the year, she decided to write off Abena’s debt of GH₵8,000, make a specific allowance for Kofi’s debt totalling GH₵3,500, and create a general allowance of 5% of remaining trade receivables.
During her second year of trading, she made sales on credit of GH₵300,000 and received cash of GH₵280,000, including GH₵4,000 from Abena. At 31 December 20X8, she decided to write off Kofi’s debt and create a specific allowance against 50% of Esi’s total debt of GH₵6,000. She decided that a general allowance should now be 8% of remaining accounts receivable.
In the year to 31 December 20X9, Akosua made credit sales of GH₵500,000 and received cash of GH₵400,000. Separate from this, she also received a cheque from Esi for GH₵6,000.
At the year-end, she decided to create a specific allowance against Kwame’s debt of GH₵50,000 and maintain a general allowance at 8%.

Required
For each of the above years, show the trade receivables account, irrecoverable debt expense account, and allowance for receivables account, and the statement of financial position extract as at each year end.

Answer

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Tags: Allowance for receivables, Bad Debts, Cash receipts, Credit Sales, Doubtful debts, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

FA – L1 – Q34 – Bad and doubtful debt

Write up irrecoverable debt expense and allowance for receivables accounts for three years with specific and general allowances.

Question

Kwame commenced trading on 1 April 20X6. He extracted the following list of balances from his sales ledger as at 31 March 20X7:

	GH₵
Kojo	200,000
Ama	400,000
Others	6,300,000
	6,900,000

In the year to 31 March 20X7:
(1) Kojo emigrated leaving numerous debts.
(2) Ama is disputing certain invoices, amounting to GH₵100,000, which have been outstanding for more than six months. Kwame estimates that Ama will eventually pay half the disputed amount.

In the year to 31 March 20X8:
The sales ledger listing as at 31 March 20X8 is as follows:

	GH₵
Esi	240,000
Adwoa	400,000
Ama	60,000
Others	6,600,000
	7,300,000

(1) Esi has been declared bankrupt and her debt is to be written off.
(2) Adwoa is experiencing cash flow difficulties. Kwame considers a 50% allowance to be appropriate.
(3) Kwame is no longer supplying goods to Ama. The balance, which is in respect of last year’s disputed invoices, is to be written off.

In the year to 31 March 20X9:
(1) Total receivables per the sales ledger listing are GH₵7,500,000 as at 31 March 20X9.
(2) There are no debts requiring specific allowance.
(3) GH₵50,000 has been received from Esi.

Required
Assuming that Kwame requires a general allowance for receivables of 5%, write up the irrecoverable debt expense and allowance accounts for the three years to 31 March 20X9.

Answer

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Tags: Allowance for receivables, Bad Debts, Credit Sales, Doubtful debts, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

FA – L1 – Q33 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance for receivables accounts for two years, including recovery of written-off debt.

Question

Kofi, a trader, had receivables of GH₵50,000,000 at 30 June 20X7. He decided to establish an allowance for receivables balance based on 5% of the account balance at the statement of financial position date. He made the first allowance at 30 June 20X7.
The following relates to the years ended 30 June 20X8 and 30 June 20X9:

	Year ended 30 June
	20X8	20X9
	GH₵(000)	GH₵(000)
Credit sales	480,000	550,000
Cash received from customers	432,000	560,600
Irrecoverable debts written off	6,000	2,000

On 30 September 20X8, cash was received in respect of an irrecoverable debt written off in the year ended 30 June 20X8. The amount is included in the GH₵560,600 “cash received from customers” above.

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

Answer

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Tags: Allowance for receivables, Bad Debts, Cash receipts, Credit Sales, Doubtful debts, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

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.

Answer

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Tags: Accounting entries, Allowance for receivables, Bad Debts, Doubtful debts, Financial Statements, Ghana, Irrecoverable debts, Ledger accounts, Trade Receivables, Year-end adjustments
Level: Level 1

Topic: Bad and doubtful debt

FA – L1 – Q31 – Bad and doubtful debt

Prepare journal entries and ledger accounts for irrecoverable debts and allowance for receivables for Kwame Boateng over two years.

Question

The following information is available for Kwame Boateng:
Year 1
(1) 1 January: Allowance for receivables of GH¢860,000 standing on the books.
(2) 31 December: Trade receivables amount to GH¢15,000,000.
(3) Irrecoverable debts written off during the year amounted to GH¢1,000,000.
(4) An allowance for 7.5% of trade receivables is required.
Year 2
(1) 31 December: Trade receivables, before adjustments are GH¢13,700,000.
(2) Irrecoverable debts to be written off are GH¢1,100,000.
(3) Allowance for 7.5% of receivables is still considered necessary.

Required:
Show the journal entries to record the above and the relevant irrecoverable debt expense and allowance for receivables ledger accounts.

Answer

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

Topic: Bad and doubtful debt

FA – L1 – Q30 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kojo Mensah.

Question

The financial records of Kojo Mensah include an allowance for receivables of GH¢206,000 brought forward on 1 January. Trade receivables at 31 December amount to GH¢2,440,000 and irrecoverable debts to be written off total GH¢55,000. An allowance for receivables of 5% of receivables is to be carried forward.

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

Answer

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

Topic: Bad and doubtful debt

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

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

Topic: Bad and doubtful debt

FA – L1 – Q28 – Bad and doubtful debt

Prepare ledger accounts and financial statement extracts for Ama Kusi's receivables adjustments for Year 7.

Question

Ama Kusi is a sole trader making up accounts to 31 July each year.
At 31 July Year 6 the balance on the allowance for receivables account was GH¢1,420,000. During the following financial period ending 31 July Year 7, Ama Kusi suffered a number of irrecoverable debts amounting to GH¢723,000, which she wrote off to the irrecoverable debts account.
At 31 July Year 7 Ama Kusi listed out all receivables balances, which totalled GH¢32,456,000. After reviewing the list Ama Kusi decided that three balances – namely Kwame Boateng GH¢230,000, Adwoa Mensah GH¢562,000, and Kofi Owusu GH¢56,000 – were all doubtful and had to be allowed for as doubtful debts. In addition, Ama Kusi considered that 2% of all the remaining balances were doubtful and an allowance for receivables should be recognised.

Required:
Show the ledger accounts reflecting the necessary adjustments, and the relevant extracts from the financial statements.

Answer

Find Related Questions by Tags, levels, etc.

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

Topic: Bad and doubtful debt

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FA – L1 – Q35 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance accounts for three years with specific and general allowances, including financial position extracts.

FA – L1 – Q34 – Bad and doubtful debt

Write up irrecoverable debt expense and allowance for receivables accounts for three years with specific and general allowances.

FA – L1 – Q33 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance for receivables accounts for two years, including recovery of written-off debt.

FA – L1 – Q32 – Bad and doubtful debt

Write up irrecoverable debts and allowance for receivables accounts for three years, including financial statement extracts.

FA – L1 – Q31 – Bad and doubtful debt

Prepare journal entries and ledger accounts for irrecoverable debts and allowance for receivables for Kwame Boateng over two years.

FA – L1 – Q30 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kojo Mensah.

FA – L1 – Q29 – Bad and doubtful debt

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

FA – L1 – Q28 – Bad and doubtful debt

Prepare ledger accounts and financial statement extracts for Ama Kusi's receivables adjustments for Year 7.

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FA – L1 – Q35 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance accounts for three years with specific and general allowances, including financial position extracts.

You're reporting an error for "FA – L1 – Q35 – Bad and doubtful debt"

FA – L1 – Q34 – Bad and doubtful debt

Write up irrecoverable debt expense and allowance for receivables accounts for three years with specific and general allowances.

You're reporting an error for "FA – L1 – Q34 – Bad and doubtful debt"

FA – L1 – Q33 – Bad and doubtful debt

Write up receivables, irrecoverable debts expense, and allowance for receivables accounts for two years, including recovery of written-off debt.

You're reporting an error for "FA – L1 – Q33 – Bad and doubtful debt"

FA – L1 – Q32 – Bad and doubtful debt

Write up irrecoverable debts and allowance for receivables accounts for three years, including financial statement extracts.

You're reporting an error for "FA – L1 – Q32 – Bad and doubtful debt"

FA – L1 – Q31 – Bad and doubtful debt

Prepare journal entries and ledger accounts for irrecoverable debts and allowance for receivables for Kwame Boateng over two years.

You're reporting an error for "FA – L1 – Q31 – Bad and doubtful debt"

FA – L1 – Q30 – Bad and doubtful debt

Prepare irrecoverable debts expense and allowance for receivables accounts for Kojo Mensah.

You're reporting an error for "FA – L1 – Q30 – Bad and doubtful debt"

FA – L1 – Q29 – Bad and doubtful debt

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

You're reporting an error for "FA – L1 – Q29 – Bad and doubtful debt"

FA – L1 – Q28 – Bad and doubtful debt

Prepare ledger accounts and financial statement extracts for Ama Kusi's receivables adjustments for Year 7.

You're reporting an error for "FA – L1 – Q28 – Bad and doubtful debt"

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