ICAEW AF · Chapter 10 · Question 8 of 9
During the year, a business wrote off irrecoverable debts of £1,320 and received £410 from a customer whose debt had been written off two years earlier. The allowance for receivables was £5,600 at the start of the year and is to be £4,750 at the end. What is the net charge to profit or loss for irrecoverable debts for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £60
Explanation
Write-offs increase the charge by £1,320. The allowance falls by £5,600 - £4,750 = £850, which is credited to profit or loss. The recovery of a debt written off in an earlier year is also credited, £410. Net charge = £1,320 - £850 - £410 = £60.
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