Selena had receivables of $149,650 at 30 November 20X7. Her allowance for receivables at 1 December 20X6 was $3,115. She wished to change it to the equivalent of 2% of receivables at 30 November 20X7. On 29 November 20X7 she received $159 in full settlement of a debt that she had written off in the year ended 30 November 20X6.
What total amount should be recognised for receivables in the statement of profit or loss for the year ended 30 November 20X7 ?
Answer
| $ | |
| Receivables allowance at 30/11/X7 (149,650 x 2%) | 2,993 |
| Opening allowance at 1/12/X6 | (3115) |
| Reduction in allowance (credit to statement of profit or loss) | (122) |
Total credit to statement of profit or loss = 122 + 159 = $281
Journal Entry
Dr. Cash………………………………………….159
Cr. Irrecoverable debts…………………………….……159
Dr. allowances for receivables…..122
Cr. Irrecoverable debts ……………………..122