Question Tag: Allowance for Receivables

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FA – Nov 2024 – L1 – Q2b – Allowance for Receivables and Irrecoverable Debt

Prepare the allowance for receivables and irrecoverable debt expense accounts for a financial period.

Question

At 1 August 2023, the balance on the allowance for receivables account was GH¢12,600.

At 31 August 2023, the company’s management decided that the revised balance should be 10% of the month-end accounts receivable.

Required:

Prepare the Allowance for Receivables and Irrecoverable Debt Expense accounts, showing the necessary entries for the financial period ending 31 August 2023.

Answer

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Tags: Allowance for Receivables, Doubtful Debts, Financial Adjustments, Irrecoverable Debt, Provision for Bad Debts
Level: Level 1

Topic: Bad and doubtful debt
Series: Nov 2024

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Question

Additional Information:
i) The inventory count on 30 June 2019 showed closing inventory valued at GHȼ34,380.
ii) A review of receivables as at 30 June 2019 showed that a further GHȼ2,300 was to be written off as an irrecoverable debt. Therefore, it was decided that the closing allowance for receivables was 10% of the outstanding receivables balance as at 30 June 2019.
iii) On 30 June 2019, Sintim received a cheque of GHȼ1,680 in relation to an irrecoverable debt previously written off.
iv) A supplier of Sintim has charged an interest of GHȼ1,490 on a payable balance that has been outstanding for over 200 days.
v) GHȼ16,000 of insurance in the trial balance above relates to 1 January 2019 to 31 December 2019.
vi) Allowance to be made for depreciation is as follows:

Land: Not depreciated.
Delivery van: 10% straight line basis.
vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

Answer

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Tags: Allowance for Receivables, Depreciation, Inventory, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Bad and doubtful debt, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2021

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

Question

The following is the trial balance of Poloo Ltd as at 31 December 2020:

Account	Debit (GH¢)	Credit (GH¢)
Authorised, issued, and called-up capital:
– 500,000 equity shares of GH¢1 each		500,000
– 60,000 7% redeemable preference shares of 50p each		30,000
Equipment: cost	350,000
Equipment: accumulated depreciation		75,000
Motor vehicle: cost	160,000
Motor vehicle: accumulated depreciation		25,650
Premises	220,000
Inventory as at 1 January 2020	51,980
Bank	10,050
Sales		508,420
Purchases	225,000
Trade receivables	130,010
Trade payables		10,200
Distribution costs	80,400
Administrative expenses	45,240
Irrecoverable debts	1,250
Allowance for receivables		14,360
Rent received		8,500
Income from investments		17,040
Interim dividend on equity shares	7,420
Retained earnings		51,760
General reserve		40,420
Total	1,281,350	1,281,350

Additional information:
i) Inventories as at 31 December 2020 are valued at GH¢85,420.
ii) Insurance includes GH¢840 for one and half years ending 30 June 2021. Insurance is included in administrative expenses.
iii) Rent received includes an amount of GH¢2,400 paid in advance as at 31 December 2020.
iv) Distribution costs of GH¢750 were prepaid, and administrative expenses of GH¢800 were owing as at 31 December 2020.
v) The total trade receivables balance of GH¢130,010 includes a balance of GH¢1,010 which has been outstanding for ten months. Poloo Ltd has decided to write off this balance.
vi) Poloo Ltd’s policy is to allow for receivables on the basis of the length of time the debt has been outstanding. The aged analysis of trade receivables at 31 December 2020 and the required allowance are shown below:

Age of Debt	Balance (GH¢)	Allowance Required
0 – 30 days	80,000	Nil
31 – 60 days	40,000	20% of balances
Over 60 days	10,010	85% of balances

vii) On 15 January 2020, Poloo Ltd purchased premises at a cost of GH¢105,000. This cost included GH¢3,500 relating to legal costs. The legal costs of GH¢3,500 had been included in administrative expenses and not in the cost of premises. Premises are not depreciated.
viii) On 1 April 2020, Poloo Ltd purchased equipment that cost GH¢50,000. This transaction was entered in the accounts on 1 April 2020.
ix) Depreciation is to be provided as follows:

Equipment: 20% per annum on cost
Motor vehicles: 20% per annum reducing balance basis
x) Depreciation on equipment is apportioned 20% to administrative expenses and 80% to distribution costs. Depreciation is charged for each month of use. Depreciation of motor vehicles is treated as a distribution cost.

Required:
Prepare, for Poloo Ltd, the following statements in accordance with International Financial Reporting Standards (IFRS):
a) Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)
b) Statement of Financial Position as at 31 December 2020.
(10 marks)

Answer

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Tags: Allowance for Receivables, Depreciation, Income Statement, Inventory, Statement of Financial Position
Level: Level 1

Topic: Inventory, Non-current assets and depreciation, Preparation of limited liability company financial statements
Series: MAY 2021

FA – May 2021 – L1 – Q2 – Accruals and prepayments | Bad and doubtful debt | Preparation of Partnership accounts

Preparation of ledger accounts for accruals and prepayments and accounts on the dissolution of a partnership.

Question

a) The following information is available from the books of Twibom Ltd.

Item	1 January 2020 (GH¢)	31 December 2020 (GH¢)
Interest received	680 Accrued	750 Accrued
General expenses	5,200 Prepaid	3,180 Accrued
Allowance for receivables	1,350	–
Receivables	45,000	56,000

During the year ended 31 December 2020, the following amounts were received or paid (all transactions were through the bank account).

Date	Transaction	Amount (GH¢)
31 March	Interest received	1,280
4 August	General expenses paid	4,500
5 December	Rent paid	27,000

The rent is due in equal monthly installments. The payment for rent covered the period from 1 January 2020 to 31 March 2021.

The allowance for receivables is to be set using the same percentage of receivables as in the previous year.

Required:
Prepare the following ledger accounts for the year ended 31 December 2020.
i) Interest Received (1 mark)
ii) General Expenses (1 mark)
iii) Rent (1 mark)
iv) Allowance for Receivables (2 marks)

b) Agbeko, Musah, and Osei had been in partnership for several years sharing profits and losses in the ratio 5:3:2. On 1 January 2021, they decided to dissolve their partnership after a disagreement. The Statement of Financial Position of the partnership as at 31 December 2020, was as follows:

Additional Information

The plant and machinery were sold for GH¢98,200.
The inventory was sold for GH¢40,500.
The Receivables realized GH¢62,000.
The motor vehicles were taken over by Agbeko at an agreed value of GH¢40,800.
The furniture and fittings were sold for GH¢50,400.
A discount of GH¢4,320 was received when payables were paid off.
The loan was repaid in full on 1 January 2021.
There were no outstanding interest payments on the loan.
Dissolution expenses amounted to GH¢3,000.

Required:
Prepare the following accounts on dissolution:
i) Partners’ capital accounts (3 marks)
ii) Realization account (7 marks)
iii) Bank account (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Capital Account, General Expenses, Interest Received, Partnership Dissolution, Realization Account, Rent
Level: Level 1

Topic: Accruals and prepayments, Bad and doubtful debt, Preparation of Partnership accounts
Series: MAY 2021

FA – Nov 2024 – L1 – Q2b – Allowance for Receivables and Irrecoverable Debt

Prepare the allowance for receivables and irrecoverable debt expense accounts for a financial period.

Question

At 1 August 2023, the balance on the allowance for receivables account was GH¢12,600.

At 31 August 2023, the company’s management decided that the revised balance should be 10% of the month-end accounts receivable.

Required:

Prepare the Allowance for Receivables and Irrecoverable Debt Expense accounts, showing the necessary entries for the financial period ending 31 August 2023.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Doubtful Debts, Financial Adjustments, Irrecoverable Debt, Provision for Bad Debts
Level: Level 1

Topic: Bad and doubtful debt
Series: Nov 2024

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

Question

Land: Not depreciated.
Delivery van: 10% straight line basis.
vii) Upon investigation, it was revealed that the balance in the suspense account relates to a cash receipt from a customer of GHȼ800 that was credited to the bank account in error.

Required:
a) Prepare the statement of Profit or Loss for the year ended 30 June 2019.
(12 marks)
b) Prepare the statement of Financial Position as at that date.
(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Depreciation, Inventory, Statement of Financial Position, Statement of Profit or Loss
Level: Level 1

Topic: Bad and doubtful debt, Inventory, Non-current assets and depreciation, Preparation of financial statements of a sole trader
Series: NOV 2021

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

Question

The following is the trial balance of Poloo Ltd as at 31 December 2020:

Account	Debit (GH¢)	Credit (GH¢)
Authorised, issued, and called-up capital:
– 500,000 equity shares of GH¢1 each		500,000
– 60,000 7% redeemable preference shares of 50p each		30,000
Equipment: cost	350,000
Equipment: accumulated depreciation		75,000
Motor vehicle: cost	160,000
Motor vehicle: accumulated depreciation		25,650
Premises	220,000
Inventory as at 1 January 2020	51,980
Bank	10,050
Sales		508,420
Purchases	225,000
Trade receivables	130,010
Trade payables		10,200
Distribution costs	80,400
Administrative expenses	45,240
Irrecoverable debts	1,250
Allowance for receivables		14,360
Rent received		8,500
Income from investments		17,040
Interim dividend on equity shares	7,420
Retained earnings		51,760
General reserve		40,420
Total	1,281,350	1,281,350

Age of Debt	Balance (GH¢)	Allowance Required
0 – 30 days	80,000	Nil
31 – 60 days	40,000	20% of balances
Over 60 days	10,010	85% of balances

Equipment: 20% per annum on cost
Motor vehicles: 20% per annum reducing balance basis
x) Depreciation on equipment is apportioned 20% to administrative expenses and 80% to distribution costs. Depreciation is charged for each month of use. Depreciation of motor vehicles is treated as a distribution cost.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Depreciation, Income Statement, Inventory, Statement of Financial Position
Level: Level 1

Topic: Inventory, Non-current assets and depreciation, Preparation of limited liability company financial statements
Series: MAY 2021

FA – May 2021 – L1 – Q2 – Accruals and prepayments | Bad and doubtful debt | Preparation of Partnership accounts

Preparation of ledger accounts for accruals and prepayments and accounts on the dissolution of a partnership.

Question

a) The following information is available from the books of Twibom Ltd.

Item	1 January 2020 (GH¢)	31 December 2020 (GH¢)
Interest received	680 Accrued	750 Accrued
General expenses	5,200 Prepaid	3,180 Accrued
Allowance for receivables	1,350	–
Receivables	45,000	56,000

During the year ended 31 December 2020, the following amounts were received or paid (all transactions were through the bank account).

Date	Transaction	Amount (GH¢)
31 March	Interest received	1,280
4 August	General expenses paid	4,500
5 December	Rent paid	27,000

The rent is due in equal monthly installments. The payment for rent covered the period from 1 January 2020 to 31 March 2021.

The allowance for receivables is to be set using the same percentage of receivables as in the previous year.

Additional Information

The plant and machinery were sold for GH¢98,200.
The inventory was sold for GH¢40,500.
The Receivables realized GH¢62,000.
The motor vehicles were taken over by Agbeko at an agreed value of GH¢40,800.
The furniture and fittings were sold for GH¢50,400.
A discount of GH¢4,320 was received when payables were paid off.
The loan was repaid in full on 1 January 2021.
There were no outstanding interest payments on the loan.
Dissolution expenses amounted to GH¢3,000.

Required:
Prepare the following accounts on dissolution:
i) Partners’ capital accounts (3 marks)
ii) Realization account (7 marks)
iii) Bank account (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Allowance for Receivables, Capital Account, General Expenses, Interest Received, Partnership Dissolution, Realization Account, Rent
Level: Level 1

Topic: Accruals and prepayments, Bad and doubtful debt, Preparation of Partnership accounts
Series: MAY 2021

Question Tag: Allowance for Receivables

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FA – Nov 2024 – L1 – Q2b – Allowance for Receivables and Irrecoverable Debt

Prepare the allowance for receivables and irrecoverable debt expense accounts for a financial period.

Required:

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

FA – May 2021 – L1 – Q2 – Accruals and prepayments | Bad and doubtful debt | Preparation of Partnership accounts

Preparation of ledger accounts for accruals and prepayments and accounts on the dissolution of a partnership.

FA – Nov 2024 – L1 – Q2b – Allowance for Receivables and Irrecoverable Debt

Prepare the allowance for receivables and irrecoverable debt expense accounts for a financial period.

Required:

FA – Nov 2021 – L1 – Q4 – Bad and doubtful debt | Inventory | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, inventory, and receivables.

FA – May 2021 – L1 – Q4 – Inventory | Non-current assets and depreciation | Preparation of limited liability company financial statements

Preparation of financial statements for a limited liability company, including adjustments for inventory, prepayments, accruals, depreciation, and allowance for receivables.

FA – May 2021 – L1 – Q2 – Accruals and prepayments | Bad and doubtful debt | Preparation of Partnership accounts

Preparation of ledger accounts for accruals and prepayments and accounts on the dissolution of a partnership.

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