ICAEW AF · Chapter 10 · Question 5 of 9
A business's required allowance for receivables at the year end is lower than the allowance brought forward from the previous year. How is the reduction recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Debit Allowance for receivables, Credit Irrecoverable debts expense (a credit to profit or loss)
Explanation
Only the movement in the allowance passes through profit or loss. A decrease means the allowance account is debited to reduce the balance, and the irrecoverable debts expense is credited. This reduces the total charge for the year and may result in a net credit to profit or loss.
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