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Adjustments and the Matching Principle
Quick questions on Irrecoverable debts: N(A)-Level Principles of Accounts
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are irrecoverable debts?Show answer
An irrecoverable debt (sometimes called a bad debt) is one the business is sure it will not collect, for example because the customer has gone out of business. It is written off:
What are allowance for doubtful debts?Show answer
Even among debts still expected to be paid, experience says some will not be. To match this likely loss to the period of the sales, a business creates an allowance for doubtful debts, usually a percentage of remaining receivables:
What is q1?Show answer
State the double entry to write off an irrecoverable debt of \250$. [2 marks]
What is q2?Show answer
Receivables after write-offs are \30,0002\%$. Calculate the allowance and net receivables. [2 marks]
What is q3?Show answer
Explain the difference between an irrecoverable debt and an allowance for doubtful debts. [2 marks]
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