Question 1

At 1 January 20X8, TradeCorp had an allowance for receivables of $12,000. At 31 December 20X8, total trade receivables were $450,000. The directors wish to write off an irrecoverable debt of $10,000 and then adjust the allowance for receivables to 5% of the remaining trade receivables balance. What is the total charge to the statement of profit or loss for receivables expense for the year ended 31 December 20X8?

Accepted Answer

First, deduct the irrecoverable debt from total receivables. Second, calculate the new required allowance. Third, find the movement in the allowance. Finally, add the write-off and the movement together.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the 5% allowance on the $450,000 before deducting the $10,000 write-off, or charging the full new allowance ($22,000) to the P&L instead of just the movement.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 3

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