Skip to content

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

Which journal correctly records an adjusting event where a trade receivable of $8,000 existing at the reporting date is found, after the year-end, to be irrecoverable? Assume no allowance was previously held against it.

Debit irrecoverable debts expense and credit trade receivables by $8,000. The post-year-end evidence is an adjusting event, so the year-end accounts are corrected by recognising the expense and removing the receivable from assets.

  1. ADebit Irrecoverable debts expense $8,000; credit Trade receivables $8,000Correct
  2. BDebit Trade receivables $8,000; credit Irrecoverable debts expense $8,000
  3. CDebit Allowance for receivables $8,000; credit Revenue $8,000
  4. DNo journal; disclose in the notes only

Explanation

The event is adjusting, so the year-end ledgers are corrected. The expense is debited to profit or loss and the receivable is removed by a credit to trade receivables. The reverse entry would increase assets and profit. Note disclosure alone applies only to non-adjusting events.

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