Question 1

Section A

At 1 January 20X8, a mining company had an allowance for receivables of $15,000. During the year, a specific debt of $4,000 was written off as irrecoverable. At 31 December 20X8, the total trade receivables balance (after the write-off) was $400,000. The company policy is to maintain an allowance of 5% of trade receivables. What is the total charge to the statement of profit or loss for irrecoverable debts and allowance for receivables for the year ended 31 December 20X8?

Accepted Answer

1. Calculate the irrecoverable debt written off ($4,000). 2. Calculate the required closing allowance (5% of $400,000 = $20,000). 3. Calculate the movement in the allowance ($20,000 - $15,000 = $5,000 increase). 4. Total P&L charge = Write-off + Increase in allowance.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Charging the full closing allowance 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 6

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