ICAEW AF · Chapter 10 · Question 6 of 9
At 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 off. 2. An allowance of 50% is to be made against a specific debt of £4,000. 3. A further allowance of 2% is to be made against the remaining receivables. The allowance for receivables brought forward is £3,950. What is the total charge to profit or loss for irrecoverable debts and the allowance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) £3,970
Explanation
Remaining receivables for the general allowance = £128,500 - £3,500 - £4,000 = £121,000; general allowance = 2% x £121,000 = £2,420. Specific allowance = 50% x £4,000 = £2,000. Total allowance = £4,420, an increase of £470 on the opening £3,950. Total charge = £3,500 + £470 = £3,970.
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