ACCA FA2 ALLOWANCE FOR RECEIVABLES
At 1 May 2012 Ruka’s receivables allowance was $2,700. At 30 April 2013, the balance on her trade receivables account was $90,000 and she decided to write off debts of $1,800 as irrecoverable. She estimated that her receivables allowance at 30 April 2013 should be equivalent
to 2% of outstanding balances.
What amount should be charged to Ruka’s income statement for the year to 30 April 2013?
Suggested Solution.
| $ | $ | |
| Financial Position | income statement | |
| Receivables | 90,000 | |
| Irrecoverable debts | 1,800 | 1,800 |
| Receivables after Irrecoverable debts | 88,200 | |
| 2 % allowance | 1,764 | 1,764 |
| Closing receivables | 86,436 | |
| Less existing allowance | (2,700) | |
| Answer | 864 |
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