ACCA Applied Knowledge · Financial Accounting · Receivables and payables
Trade receivables at the year end are $120,000 before adjustments. This includes a $8,000 balance from Kestrel Co, which has gone into liquidation and must be written off as irrecoverable. The company then maintains an allowance of 4% of the remaining receivables. The opening allowance was $3,500. What is the total charge to profit or loss for irrecoverable debts and the allowance movement?
After writing off the $8,000 balance, receivables are $112,000 and the 4% allowance is $4,480. Compared with the $3,500 opening allowance, the increase is $980. Adding the $8,000 write-off gives a total profit or loss charge of $8,980.
- A$8,000
- B$9,980
- C$8,980Correct
- D$12,300
Explanation
Remaining receivables = 120,000 - 8,000 = 112,000; allowance 4% = 4,480. Increase over opening 3,500 = 980. Total charge = 8,000 write-off + 980 = 8,980. Option $9,980 miscalculates; $12,300 ignores the opening allowance and uses wrong base.
Did you get it right without looking?
One question tells you little. A timed set on Receivables and payables shows your real accuracy, how long you take and where you lose marks.
More Receivables and payables questions
- A trader's purchase invoice shows goods of $5,000 and sales tax of $750. Which statement is correct about recording this purchase where the …
- Which one of the following is a purpose of maintaining a purchases ledger control account?
- Which statement about a supplier statement reconciliation is correct?
- At 31 March, Harlow Co's payables ledger account for supplier Denby shows a credit balance of $8,400. Denby's statement shows $9,150 owing. …
- At the start of the year Marlow Ltd had an allowance for receivables of $4,200. At the year end, trade receivables are $90,000 and the allow…
- Delta Co previously wrote off a $2,400 receivable as irrecoverable. The customer unexpectedly pays the full amount in cash in the current ye…