Allowance for Doubtful Debts

FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts

Preparation and balancing of Trade Receivables, Bad Debts, and Allowances for Doubtful Debts accounts.

Question

It was discovered on December 31, 2016, Baruwa Limited had a receivables balance of N15,000,000. It was discovered, before the preparation of the final accounts, that a customer owing N3,000,000 would not be able to settle such debts. It is the policy of Baruwa Limited to make allowances for doubtful receivables of 5% of all outstanding receivables at the end of each accounting period.

During the accounting year of 2017, the company made total credit sales of N19,600,000, out of which an amount of N11,000,000 was collected from customers. A court declared a customer who owes the company an amount of N1,700,000 bankrupt in August 2017. The company recorded some cheques amounting to N3,500,000 that were dishonoured.

The company recorded N30,000,000 and N17,000,000 in connection with cash and credit sales, respectively, in the year 2018. The company received N25,000,000 from trade receivables and also showed N13,400,000 as the outstanding balance on the sales ledger account. A cheque was received from the customer whose debt was written off in 2016 in full settlement of his debt.

Required:

Prepare and balance the following accounts:

a. Trade Receivables Account (8 Marks)

b. Bad Debts Account (3 Marks)

c. Allowances for Doubtful Receivables Account (3 Marks)

d. Prepare an extract of the Statement of Financial Position as at December 31, 2018, showing the relevant balances. (6 Marks)

Answer

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Tags: Allowance for Doubtful Debts, Bad Debts, Financial Statements, Trade receivables
Level: Level 1

FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt

Prepare the trade receivables, bad debt expense, and allowance for doubtful debts accounts for Lukay's sales transactions over three years.

Question

Lukay is a wholesaler who is into the distribution of soft drinks. Lukay has been in operation for some time now, and the following transactions in relation to sales occurred in the first 3 years:

Year 1
Lukay made credit sales of GH¢60,000 and received GH¢45,000 from his credit customers. At the end of the year, she decided to write off Abrantie’s debt of GH¢2,400, made a specific allowance for Keke’s debt totaling GH¢1,050, and created a general allowance of 5% of the remaining trade receivables balance.

Year 2
During the second year of trading, Lukay made credit sales of GH¢90,000 and received cash of GH¢84,000, including GH¢1,200 from Abrantie. He decided to write off Keke’s debt and create a specific allowance against 50% of Yakubu’s total debt of GH¢1,800. He decided that his general allowance should now be 8% of the remaining trade receivables balance.

Year 3
Lukay made credit sales of GH¢150,000 and received cash of GH¢120,000. Additionally, he also received a cheque from Yakubu for GH¢1,800. At the year-end, he decided to create a specific allowance against Atia’s debt of GH¢15,000 and maintained his general allowance at 8%.

Required:

For each of the above years, show the trade receivables account, bad debt expense account, and allowance for doubtful debts account, and the statement of financial position extract as at each year-end. (10 marks)

Answer

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Tags: Allowance for Doubtful Debts, Bad Debts, Sales Revenue, Trade receivables
Level: Level 1

Topic: Bad and doubtful debt
Series: MAR 2024

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

Question

Kofi Badu, a sole trader, extracted the following Trial Balance from the business books as of 30 April 2019:

The following information is also relevant:
i) The closing inventory as at 30 April 2019 was valued at GH¢8,010.
ii) As at 30 April 2019, accrued rent income for the year amounted to GH¢420; heat and light accrued was GH¢260; whilst salaries of GH¢720 was paid in advance.
iii) During the year, Kofi Badu had withdrawn goods costing GH¢720 for his personal use. This had not been recorded in the accounts.
iv) New equipment costing GH¢2,650 was purchased during the year but had been mistakenly included in purchases. This is yet to be corrected.
v) A cheque for GH¢440 received from a customer in full settlement of a debt of GH¢450 has not yet been entered in the accounts.
vi) Allowance for doubtful debt is to be maintained at 2% of receivables.
vii) Depreciation is to be provided for as follows:

Equipment- 20% per annum using the straight-line method. A full year’s depreciation is provided on all equipment held at 30 April 2019, regardless of the date of purchase.
Motor vehicles- 40% per annum using the reducing balance method.

Required:
a) Prepare a statement of profit or loss for Kofi Badu for the year ended 30 April 2019.
(12 marks)

b) Prepare a statement of financial position for Kofi Badu as at 30 April 2019.

Answer

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Tags: Accruals, Allowance for Doubtful Debts, Depreciation, Drawings, Income Statement, Prepayments, Statement of Financial Position
Level: Level 1

Topic: Accruals and prepayments, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2020

FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts

Preparation and balancing of Trade Receivables, Bad Debts, and Allowances for Doubtful Debts accounts.

Question

Required:

Prepare and balance the following accounts:

a. Trade Receivables Account (8 Marks)

b. Bad Debts Account (3 Marks)

c. Allowances for Doubtful Receivables Account (3 Marks)

d. Prepare an extract of the Statement of Financial Position as at December 31, 2018, showing the relevant balances. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Doubtful Debts, Bad Debts, Financial Statements, Trade receivables
Level: Level 1

FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt

Prepare the trade receivables, bad debt expense, and allowance for doubtful debts accounts for Lukay's sales transactions over three years.

Question

Lukay is a wholesaler who is into the distribution of soft drinks. Lukay has been in operation for some time now, and the following transactions in relation to sales occurred in the first 3 years:

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Doubtful Debts, Bad Debts, Sales Revenue, Trade receivables
Level: Level 1

Topic: Bad and doubtful debt
Series: MAR 2024

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

Question

Kofi Badu, a sole trader, extracted the following Trial Balance from the business books as of 30 April 2019:

Equipment- 20% per annum using the straight-line method. A full year’s depreciation is provided on all equipment held at 30 April 2019, regardless of the date of purchase.
Motor vehicles- 40% per annum using the reducing balance method.

Required:
a) Prepare a statement of profit or loss for Kofi Badu for the year ended 30 April 2019.
(12 marks)

b) Prepare a statement of financial position for Kofi Badu as at 30 April 2019.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accruals, Allowance for Doubtful Debts, Depreciation, Drawings, Income Statement, Prepayments, Statement of Financial Position
Level: Level 1

Topic: Accruals and prepayments, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2020

Question Tag: Allowance for Doubtful Debts

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FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts

Preparation and balancing of Trade Receivables, Bad Debts, and Allowances for Doubtful Debts accounts.

FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt

Prepare the trade receivables, bad debt expense, and allowance for doubtful debts accounts for Lukay's sales transactions over three years.

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts

Preparation and balancing of Trade Receivables, Bad Debts, and Allowances for Doubtful Debts accounts.

FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt

Prepare the trade receivables, bad debt expense, and allowance for doubtful debts accounts for Lukay's sales transactions over three years.

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

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Question Tag: Allowance for Doubtful Debts

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FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts

Preparation and balancing of Trade Receivables, Bad Debts, and Allowances for Doubtful Debts accounts.

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FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt

Prepare the trade receivables, bad debt expense, and allowance for doubtful debts accounts for Lukay's sales transactions over three years.

You're reporting an error for "FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt"

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

You're reporting an error for "FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts

Preparation and balancing of Trade Receivables, Bad Debts, and Allowances for Doubtful Debts accounts.

You're reporting an error for "FA – May 2023 – L1 – SB – Q1 – Recording Financial Transactions, Bad and Doubtful Debts"

FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt

Prepare the trade receivables, bad debt expense, and allowance for doubtful debts accounts for Lukay's sales transactions over three years.

You're reporting an error for "FA – Mar 2024 – L1 – Q2a – Bad and doubtful debt"

FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the income statement and statement of financial position for a sole trader with adjustments for inventory, accruals, prepayments, depreciation, and other relevant adjustments.

You're reporting an error for "FA – Nov 2020 – L1 – Q4 – Accruals and prepayments | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

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