Charge for receivables expense ( video below)

At 31 December 20X5 a company’s receivables totalled $100,000 and an allowance for receivables of $12,500 had been brought forward from the year ended 31 December 20X4.

It was decided to write off debts totaling $9,500. The allowance for receivables was to be adjusted to the equivalent of 5% of the receivables.

What charge for receivables expense should appear in the company’s statement of profit or loss for the year ended 31 December 20X5?

Answer

$

Closing allowance (100,000 – 9,500) x 5%         4,525

Opening allowance                                               12,500

Decrease in allowance                                         (7,975)

Irrecoverable debts written off                          9,500 

Charge                                                                    1,525

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