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ACCA Applied Knowledge · Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records

Which one of the following journal entries correctly records the write-off of an irrecoverable debt of $800, assuming no allowance for receivables has been created for it?

The correct entry is to debit irrecoverable debts expense and credit receivables by $800. This removes the uncollectable asset and charges the loss to profit or loss. Reversing the entry would wrongly increase receivables and reduce expenses.

  1. ADebit irrecoverable debts expense $800; credit receivables $800Correct
  2. BDebit receivables $800; credit irrecoverable debts expense $800
  3. CDebit allowance for receivables $800; credit sales $800
  4. DDebit sales $800; credit bank $800

Explanation

Writing off an irrecoverable debt removes the asset and recognises an expense. Receivables are credited and the irrecoverable debts expense is debited. Option B reverses the entry and would increase receivables while reducing expenses.

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