Skip to content

ACCA Applied Knowledge · Financial Accounting · Events after the reporting period

At 31 December 20X5 Tanner Co had a receivable of $48,000 from Kemp Ltd, with no allowance against it. On 20 February 20X6, before the financial statements were authorised, Kemp Ltd went into liquidation and Tanner was advised it would receive nothing. What is the correct accounting adjustment in the 20X5 financial statements?

Tanner should write off the full $48,000 in the 20X5 accounts by debiting irrecoverable debts expense and crediting trade receivables. The liquidation after the year end is an adjusting event confirming the debt was already irrecoverable at the reporting date.

  1. ADebit irrecoverable debts expense $48,000; credit trade receivables $48,000Correct
  2. BDisclose the $48,000 as a note only, with no adjustment
  3. CDebit trade receivables $48,000; credit irrecoverable debts expense $48,000
  4. DDebit irrecoverable debts expense $24,000; credit allowance for receivables $24,000

Explanation

The liquidation confirms the debt was irrecoverable at the reporting date, so it is an adjusting event. The full $48,000 is written off: debit expense, credit receivables. Note-only disclosure applies to non-adjusting events, and the other options reverse the entries or recognise only half.

Did you get it right without looking?

One question tells you little. A timed set on Events after the reporting period shows your real accuracy, how long you take and where you lose marks.

Practise Events after the reporting periodFree diagnostic mock

More Events after the reporting period questions