ExpertMedium2 marksMultiple Choice
ACCA · Question 13 · Recording Transactions: Receivables
Section A
At 1 January 20X8, Trade Receivables were $85,000 and the Allowance for Receivables was $4,000. During the year, a debt of $3,000 was written off as irrecoverable. At 31 December 20X8, it was decided to adjust the allowance for receivables to 5% of the remaining trade receivables.
What is the total charge to the statement of profit or loss for receivables expense for the year?
Section A
At 1 January 20X8, Trade Receivables were $85,000 and the Allowance for Receivables was $4,000. During the year, a debt of $3,000 was written off as irrecoverable. At 31 December 20X8, it was decided to adjust the allowance for receivables to 5% of the remaining trade receivables.
What is the total charge to the statement of profit or loss for receivables expense for the year?
Answer options:
A.
$3,000
B.
$3,100
C.
$4,100
D.
$7,100
How to approach this question
1. Deduct the write-off from Trade Receivables. 2. Calculate the new allowance. 3. Find the movement in the allowance. 4. Total expense = Write-off + Increase in allowance (or - Decrease).
Full Answer
B.$3,100✓ Correct
1. Write off debt: Trade Receivables = $85,000 - $3,000 = $82,000. Expense = $3,000.
2. Calculate new allowance: 5% of $82,000 = $4,100.
3. Movement in allowance: New ($4,100) - Old ($4,000) = $100 increase (Expense).
4. Total P&L charge = $3,000 (write-off) + $100 (allowance increase) = $3,100.
Common mistakes
Calculating the 5% allowance on the original $85,000 before deducting the written-off debt.
Practice the full ACCA FA — Financial Accounting Practice Exam 5
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