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Adjustments and the Matching Principle
Quick questions on Irrecoverable debts and allowances explained: O-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 (bad) debts?Show answer
An irrecoverable debt is one the business is sure will not be paid (the customer is insolvent or has disappeared). It is written off:
What are the allowance for doubtful debts?Show answer
Even among debts not yet written off, experience says some may not pay. The allowance for doubtful debts is an estimate of that risk, set against receivables. It is usually a percentage of receivables (after any write-offs). Creating it:
What is q1?Show answer
State the double entry to write off an irrecoverable debt of \800$ owed by a customer, Lim. [2 marks]
What is q2?Show answer
Receivables after write-offs are \30,0005\%$. State the allowance and the net receivables. [2 marks]
What is q3?Show answer
The allowance rises from \1,000\. State the amount charged to the income statement and why. [2 marks]
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