Accounting 0452 · IGCSE · Irrecoverable debts and provision for doubtful debts

Irrecoverable debts and provision for doubtful debts — practice question

NT began trading on 1 September 2020. Every sale is made on credit, and customers have to settle within 25 days. On 5 May 2021, LW, a trade receivable, was declared bankrupt and $600 was written off as irrecoverable at that time.
(a)[3]

Prepare a journal entry to write off the amount due from LW. A narrative is needed.

(b)[2]

Prepare an extract from the expenses section of NT’s income statement covering the year ended 31 August 2021.

(c)[2]

Prepare an extract from the assets section of NT’s statement of financial position dated 31 August 2021.

(d)[8]

Prepare the following ledger accounts for the year ended 31 August 2022. Carry down the balance on 1 September 2022, where appropriate.

(e)[5]

Advise NT on which option he should introduce. Support your answer.

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