Net trade receivables ( video below)
At 31 December 20X6 a company’s trade receivables totaled $216,000 and the allowance for receivables was $12,000.
It was decided that debts totaling $3,250 were to be written off. The allowance for receivables was to be adjusted to the equivalent of five per cent of the receivables.
What figures should appear in the statement of financial position for trade receivables (after deducting the allowance) and in the statement of profit or loss for receivables expense?
Answer
| $ | |
| Allowance required 5% x (216,000 – 3,250) | 10,638 |
| Existing allowance | (12,000) |
| Reduction in allowance | (1,362) |
| Irrecoverable debts written off | 3,250 |
| receivables expense | 1,888 |
Net trade receivables = $216,000 – $3,250 – $10,638 = $202,112
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