CIMA BA3 · Chapter 9 · Question 8 of 10
At the year end a business has receivables of $64,000 before writing off an irrecoverable debt of $2,500. It wants an allowance for receivables of 4% of the remaining receivables. The allowance brought forward is $2,900. What is the total charge to profit or loss for irrecoverable debts and the allowance for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $2,060
Explanation
Receivables after write-off = $64,000 - $2,500 = $61,500. Required allowance = 4% x $61,500 = $2,460. The allowance falls from $2,900 to $2,460, a decrease of $440, which is credited to profit or loss. Total charge = $2,500 - $440 = $2,060.
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