Samir trades on credit as a seller and a buyer. He has given the information below.
2023
1 January Total trade receivables $10 115
31 December Totals for the year:
Cash sales $136 900
Credit sales $124 670
Returns from credit customers $5 234
Bank transfers received from credit customers $98 620
Cash received from credit customers $11 470
Interest charged on overdue sales ledger accounts $139
Contra entries $1 833
Discount allowed to credit customers $3 125
In addition, one of Samir’s trade receivables, Ria, has gone bankrupt and Samir will not collect the $178 that she owes him. Samir believes that he will recover most of the remaining amounts owed to him by his trade receivables.
(a(i))[3]
Prepare the journal entry for writing off the amount due from Ria. Include a narrative.
(a(ii))[2]
State two reasons why Samir ought to use a provision for doubtful debts account.
(b)[9]
Prepare Samir’s sales ledger control account for the year ended 31 December 2023. Balance the account and carry down the balance at 1 January 2024.
(c(i))[5]
Advise Samir on whether he should stop offering cash discount. Support your view by outlining the advantages and disadvantages of stopping cash discount for his credit customers.
(c(ii))[1]
Suggest one other action that Samir could take to make sure he has enough cash to pay his trade payables.
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