ACCA Applied Knowledge · Financial Accounting · Receivables and payables
How should an allowance for receivables be presented in the statement of financial position of a single entity under IFRS?
The allowance for receivables is deducted from gross trade receivables so that receivables are presented net, at the amount expected to be recovered. It is a contra-asset, not a liability or reserve, and its movement is an expense.
- ADeducted from trade receivables, so receivables are shown netCorrect
- BShown as a liability under current liabilities
- CDeducted from revenue in the statement of profit or loss
- DShown as a reserve within equity
Explanation
The allowance is a contra-asset that reduces the carrying amount of receivables to the amount expected to be collected. It is not a liability or equity reserve, and its movement goes to expenses rather than being deducted from revenue.
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