Cambridge IGCSE · Accounting (0452)
2 multiple-choice questions marked as you go, and 4 written questions with worked solutions. All on Irrecoverable debts and provision for doubtful debts.
A business has trade receivables of \(\$20,000\) on 31 December. The existing provision for doubtful debts is \(\$800\). The business decides to adjust the provision to 5% of trade receivables. What is the correct entry in the income statement for the year?
On 31 December, a trader's trade receivables balance was \(\$14,600\). This included a debt of \(\$600\) which the trader decided to write off as irrecoverable. The provision for doubtful debts at 1 January was \(\$420\). The trader maintains a provision for doubtful debts at 5% of trade receivables. What was the total amount debited to the income statement for the year ended 31 December?
At the end of the financial year, a trader had trade receivables of \(\$24,000\). He decided to write off a debt of \(\$800\) as irrecoverable and then maintain a provision for doubtful debts at \(5\%\) of the remaining trade receivables. Calculate the final balance of the provision for doubtful debts.
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At the financial year end, a business has trade receivables of \(\$32,000\). This includes a debt of \(\$1,200\) that is now considered irrecoverable. The existing provision for doubtful debts is \(\$1,400\). The business policy is to maintain a provision for doubtful debts at \(5\%\) of trade receivables. Calculate the amount to be recorded in the income statement for the provision adjustment.
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On 1 January 2023, Kim's Co. had a provision for doubtful debts of \(\$4,000\). During the year, credit sales amounted to \(\$200,000\) and cash receipts from credit customers were \(\$180,000\). Irrecoverable debts of \(\$1,500\) were written off. At 31 December 2023, trade receivables were \(\$25,000\) and Kim's Co. decided to maintain the provision for doubtful debts at 5% of trade receivables. Calculate the adjustment to the provision for doubtful debts for the year ended 31 December 2023 and state its impact on the income statement.
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At the end of the financial year on 31 December 2023, H. Malik had a trade receivables balance of \( \$18,500 \). The provision for doubtful debts at the start of the year (1 January 2023) was \( \$650 \).
The following information was provided at the year-end:
1. A debt of \( \$500 \) owed by J. Low is to be written off as irrecoverable.
2. The provision for doubtful debts is to be adjusted to \( 4\% \) of the remaining trade receivables.
Required:
(a) Prepare the journal entry to write off the debt of J. Low (narrative is not required).
(b) Calculate the new provision for doubtful debts as at 31 December 2023.
(c) State the amount to be recorded in the income statement for the provision for doubtful debts adjustment, indicating if it is an increase or a decrease.
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