Credit Sales – Knowsia

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

AA – L2 – Q32 – Internal Control Systems

Specify control objectives for revenue cycle stages (order processing, despatch, return) and explain their importance. List internal controls for a manual revenue cycle system to achieve control objectives.

Question

When considering the internal controls in a revenue cycle, the auditor will need to consider the following stages:

the processing of orders; and
the despatch and return of goods

Required:
(a) Specify the control objectives for each of the above stages in a revenue cycle where all sales are made on a credit basis and explain their importance.

(b) List the internal controls you would expect to see in place in a simple manual system in order to achieve those objectives.

Answer

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Tags: Control Objectives, Credit Sales, Goods Despatch, Goods Return, Internal controls, Order Processing, Revenue Cycle
Level: Level 2

Topic: Internal Control Systems

Tag (SQ): Credit Sales

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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.

AA – L2 – Q32 – Internal Control Systems

Specify control objectives for revenue cycle stages (order processing, despatch, return) and explain their importance. List internal controls for a manual revenue cycle system to achieve control objectives.

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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"

AA – L2 – Q32 – Internal Control Systems

Specify control objectives for revenue cycle stages (order processing, despatch, return) and explain their importance. List internal controls for a manual revenue cycle system to achieve control objectives.

You're reporting an error for "AA – L2 – Q32 – Internal Control Systems"

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