Irrecoverable debts

FA – L1 – Q49 – Control accounts and account reconciliations

Prepare receivables and payables control accounts for Sahara Health Ltd for 20X9 using provided financial data.

Question

Sahara Health Ltd has an accounting system where all separate ledger accounts are maintained for each individual customer and supplier.
The management wishes to draft the related control accounts.
The following information is available:

Description	GH₵
Receivables as on December 31, 20X8	32,000,000
Payables as on December 31, 20X8	23,350,000
Cheques issued to suppliers in settlement	14,360,000
Cash sales memos issued	550,000
Goods returned to suppliers	180,000
Cheques received from receivables in settlement	31,650,000
Cheque received from suppliers against return of goods	120,000
Credit sales invoices issued	35,900,000
Returns by customers: from cash sales	320,000
Returns by customers: from credit sales	980,000
Goods purchased on credit	27,700,000
Cash refund to a debtor who had paid the amount due twice	200,000
Cheque issued by a debtor on Dec. 28, 20X8 was dishonoured on May 13, 20X9	500,000
Increase in allowance for receivables (from GH₵1,750,000 to GH₵2,250,000)	500,000
Irrecoverable debts written off	430,000
Contra settlement between payables and receivables accounts	1,660,000
Credit balances included in customers’ accounts as on December 31, 20X9	75,000
A supplier’s invoice received on December 30, 20X9 relating to goods supplied on December 28, 20X9 has not been entered in the books	350,000

Required
Prepare the receivables and payables control accounts from the above information for the year ended December 31, 20X9.

Answer

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Topic: Control accounts and account reconciliations

FA – L1 – Q48 – Control accounts and account reconciliations

Reconcile receivables control account with ledger balances, correcting errors to determine trade receivables for Adom Ventures.

Question

Adom Ventures uses a sales day book to record its sales. A receivables control account is maintained in the general ledger whereas a receivables ledger is maintained separately. On December 31, 20X9, the total of the list of receivables amounting to GH₵301,000 as per receivables ledger did not agree with the balance in the receivables control account which showed a balance of GH₵345,000. On checking, the following errors were discovered:
(i) The credit side of the subsidiary account of Kofi has been under cast by GH₵7,000.
(ii) Invoice number 23612 sent to Yaw amounting to GH₵11,000 has been recorded twice in the sales day book but has not been recorded at all in the receivables ledger.
(iii) A debit balance of GH₵9,300 and credit balances amounting to GH₵4,600 had been omitted from the list of balances.
(iv) An account of GH₵1,800 owed by Ama had been written off as irrecoverable on March 31, 20X9 and debited to irrecoverable debts, but no entry had been made in the control account.
(v) A debit balance of GH₵2,000 in the receivables ledger had been listed as a credit balance.
(vi) No entry had been made in the control account in respect of a transfer of GH₵4,100 standing to the credit of Kwame’s account in the purchases ledger to his account in the sales ledger.
(vii) The total of sales returns book had been under cast by GH₵12,000.
(viii) The list of balances had been overcast by GH₵1,000.
(ix) B’s account had been credited with GH₵3,400 for goods returned by him but no other entry had been made in the books.

Required
Prepare a statement reconciling the balance as per the list with the receivables control account clearly identifying the amount which shall be reported in the statement of financial position as ‘trade receivables’.

Answer

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Tags: accounting adjustments, Double Entry, Error Correction, Financial accounting, Irrecoverable debts, ledger reconciliation, Receivables control account, sales day book, suspense account, Trial Balance
Level: Level 1

Topic: Control accounts and account reconciliations

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

Tag (SQ): Irrecoverable debts

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FA – L1 – Q49 – Control accounts and account reconciliations

Prepare receivables and payables control accounts for Sahara Health Ltd for 20X9 using provided financial data.

FA – L1 – Q48 – Control accounts and account reconciliations

Reconcile receivables control account with ledger balances, correcting errors to determine trade receivables for Adom Ventures.

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.

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FA – L1 – Q49 – Control accounts and account reconciliations

Prepare receivables and payables control accounts for Sahara Health Ltd for 20X9 using provided financial data.

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FA – L1 – Q48 – Control accounts and account reconciliations

Reconcile receivables control account with ledger balances, correcting errors to determine trade receivables for Adom Ventures.

You're reporting an error for "FA – L1 – Q48 – Control accounts and account reconciliations"

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"

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