Chapter 7 - Irrecoverable Debts And Allowance For Doubtful Recievables

Question 1

Irrecoverable debts are also known as ?

Answer 1

Bad debts

Question 2

What are irrecoverable debts (Bad debts) ?

Answer 2

They are debts owing to a business which it considers will never be paid.

Question 3

What happened to receivables that are written off as irrecoverable debts ?

Answer 3

The business gives up chasing the debt and will accept the loss

Question 4

What is the allowance for doubtful receivables ?

Answer 4

This is the estimate by a business of the likely percentage of its trade receivables which may become irrecoverable during any one accounting period

Question 5

If it is looking like a receivable may not be able to pay what is most likely going to happen in the future ?

Answer 5

They will become doubtful receivables.

Question 6

Allowances for doubtful receivables

The general allowance is applied to ?

Answer 6

All trade receivables after writing off irrecoverable debts.

Question 7

Allowances for doubtful receivables

The specific allowance is applied to ?

Answer 7

One or more specific doubtful receivable where the risk of default is thought to be higher.

Question 8

A recoverable debts are shown on the statement of profit or loss as a ?

Answer 8

Expense

Question 9

What must be made for all irrecoverable debts which have been written off ?

Answer 9

A journal entry

Question 10

What happens when a recovery of debt is made ?

Answer 10

Recovery of debt is where a former trade receivable whose account has been written off as a recoverable makes payment

Question 11

If recoverable debts already show on the trial balance, which column would you show the amount in on the statement of profit or loss?

Answer 11

Debit column