ICAEW AF · Chapter 10 · Question 1 of 9
A business decides that a debt of £720 owed by a customer who has disappeared will never be recovered. What is the double entry to write off the debt?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Irrecoverable debts expense £720, Credit Trade receivables £720
Explanation
Writing off an irrecoverable debt removes the asset, so trade receivables are credited. The loss is recognised as an expense in profit or loss by debiting irrecoverable debts expense. Revenue is not reversed because the sale did take place.
More Irrecoverable debts and allowances for receivables MCQs
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- Q6At its year end, a business has trade receivables of £128,500. The following adjustments are needed: 1. A debt of £3,500 is to be written…
- Q7Why does a business make an allowance for receivables, rather than waiting until specific debts are known to be irrecoverable?