Question 1

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?

Accepted Answer

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).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the 5% allowance on the original $85,000 before deducting the written-off debt.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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