re was an allowance for receivables of $3,000. During the year, $1,000 of debts were written off as irrecoverable, and $800 of debts previously written off were recovered. At 31 December 20X1, it was decided to adjust the allowance for receivables to 5% of receivables which are $20,000. What figure should be included in the statement of profit or loss as the receivables expense for the year? $__________ DEBIT / CREDIT At31 December 20X2 a company's receivables totalled $400,000 an
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
At 1 January 20X1, there was an allowance for receivables of $3,000. During the year, $1,000 of debts
were written off as irrecoverable, and $800 of debts previously written off were recovered. At
31 December 20X1, it was decided to adjust the allowance for receivables to 5% of receivables which
are $20,000.
What figure should be included in the statement of profit or loss as the receivables expense for the year?
$__________ DEBIT / CREDIT
At31 December 20X2 a company's receivables totalled $400,000 and an allowance for receivables of $50,000 had been brought forward from the year ended 31 December 20X1. It was decided to write off debts totalling $38,000. The allowance for receivables was to be adjusted to the equivalent of 10% of the receivables. What charge for receivables expense should appear in the company's statement of profit or loss for the year ended 31 December 20X2?
My question is what's the difference between these two as in question1 allowance at end is calculated ( 20000*5%) BUT in question 2. Allowance at the end of year is calculated by (400000-38000)*10%.
Please explain what's the difference between these two questions
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