Irrecoverable Debts

[kamran_bsh]

Hello everyone,
Can anyone share with me topic irrecoverable debts at an advanced level.Acid,can you and other seniors please tell me something real worthy.

[Tammi]

Hi, kamran_bsh,

Your question is a bit unclear, what difficulties do you find and especially what can't you understand concerning irrecoverable debts?

Post here the examples you couldn't solve.

Regards

[Acid]

Hi Kamran ,

Please expand a bit more about what problem you are facing and I will try to help you out.

Thanks

[kamran_bsh]

A has opening balance on provision A/c of 1200. Receivables balance is 30000. At the end of year 150 was received in respect of a debt he had provided against.The other half was written off. Pass the journal entries.

Some Other Cases 4 General Enteries Are:

CASE:
If some amount is received from the amount we had provided against last year. What if amount is writen off.

CASE:
if some amount is received from amount of provision at the beggining of current year. What if some amount goes bad out of this amount.
Tomorrow i will share three examples with you people. they are really though ones and i am facing great problems in them.

[Tammi]

Hi, kamran_bsh,

If $150 that was provided against (as given in this example) went bad, there are no entries made in the allowance account . The correct entries for this will be:
Dr. Irrecoverable debts
Cr. Receivables

If $150 was already written off and received this year, the correct entries will be:
Dr. Cash
Cr. Irrecoverable debts or irrecoverable debts recovered

Regards

[kamran_bsh]

hello tammi,
But the amount recovered is from that which was provided eralier, in that case what would be the journal entry.Also, why there isnt any entry in the allowance account when amount is recovered from that which was provided earlier.
secondly, if it is specified that amount went bad is from that of provision given.following example will clarify you my problem.please, share entries with me.
Q. At the start of the year joe had an allowance of 700 against receivables.During the year 450 of this amount went bad and 150 was received;the balance remained unpaid at the year end.Another amount of 170 went bad.At the year end it is decided to provide for a new debt of 240.
Required:Journal entries & irrecoverable debt expense for the year.
Q.Doris currently has receivables balance of 47800 and an allowance for receivables of 1250.she has received 150 in respect of half of a debt she had provided against.she now believes the other half of the debt to be bad and wishes to write it off.she also wishes to maintain her allowance at 2 percent of receivables.
Required:journal entries & total charge to income statement in respect of these items.

Please note the journal entries are different in both of above questions but i dont know why.

[Tammi]

Hi, kamran_bsh,

Your questions are really very interesting, I see that you understand what happens in the case when one writes off the debts that was provided against and in the case when the written off debt is recovered.
Now, let's discuss what happens in the allowance for receivables when the debts provided against are paid or written off.
Mainly the account includes b/f (previous year's balance), c/f (current year's balance) and irrecoverable debts/income statement.
Q1. At the start of the year joe had an allowance of 700 against receivables.During the year 450 of this amount went bad and 150 was received;the balance remained unpaid at the year end.Another amount of 170 went bad.At the year end it is decided to provide for a new debt of 240.
Required:Journal entries & irrecoverable debt expense for the year.
In the allowance for receivables
b/f is 700
C/f is a bit tricky to calculate. The company decided to provide 240 new debt but the previous balance wasn't paid, so the following calculation should take place:
700 - 450 (this is written off) - 150 (already received and should be deducted) + 240 (new debt provided) = 340
Irrecoverable debts is 360 (700 - 340) (decrease in allowance)
Note: these are all entries in allowance for receivables

Q.2 Doris currently has receivables balance of 47800 and an allowance for receivables of 1250. she has received 150 in respect of half of a debt she had provided against.she now believes the other half of the debt to be bad and wishes to write it off.she also wishes to maintain her allowance at 2 percent of receivables.
Required:journal entries & total charge to income statement in respect of these items.
In the allowance for receivables
B/f is 1250
C/f is 1250 - 150 (received) - 150 (written off) = 950
note: no new debts provided against
irrecoverable debts 300 (1250 - 950) (decrease in allowance)

Q3. A has opening balance on provision A/c of 1200. Receivables balance is 30000. At the end of year 150 was received in respect of a debt he had provided against.The other half was written off. Pass the journal entries.

In this question we don't know if A provided any new debts, if s/he didn't then we can assume:
In the allowance for receivables
B/f is 1,200
C/f is 1,200 - 150 (received) - 150 (written off) = 900
irrecoverable debts 300 (1200 - 900) (decrease in allowance)

Hope this will help

[kamran_bsh]

hello tammi,
thanks alot.I have one last question if you can answer that.What would be the income statement charge in case of question 2.

[Tammi]

Q.2 Doris currently has receivables balance of 47800 and an allowance for receivables of 1250. she has received 150 in respect of half of a debt she had provided against.she now believes the other half of the debt to be bad and wishes to write it off.she also wishes to maintain her allowance at 2 percent of receivables.
Required:journal entries & total charge to income statement in respect of these items.

Total charge to income statement is 150 credit as there was a decrease in allowance 300 and written off debt only 150.

Regards

[Jeremy007]

Hi, kamran_bsh,

Your questions are really very interesting, I see that you understand what happens in the case when one writes off the debts that was provided against and in the case when the written off debt is recovered.
Now, let's discuss what happens in the allowance for receivables when the debts provided against are paid or written off.
Mainly the account includes b/f (previous year's balance), c/f (current year's balance) and irrecoverable debts/income statement.
Q1. At the start of the year joe had an allowance of 700 against receivables.During the year 450 of this amount went bad and 150 was received;the balance remained unpaid at the year end.Another amount of 170 went bad.At the year end it is decided to provide for a new debt of 240.
Required:Journal entries & irrecoverable debt expense for the year.
In the allowance for receivables
b/f is 700
C/f is a bit tricky to calculate. The company decided to provide 240 new debt but the previous balance wasn't paid, so the following calculation should take place:
700 - 450 (this is written off) - 150 (already received and should be deducted) + 240 (new debt provided) = 340
Irrecoverable debts is 360 (700 - 340) (decrease in allowance)
Note: these are all entries in allowance for receivables

Q.2 Doris currently has receivables balance of 47800 and an allowance for receivables of 1250. she has received 150 in respect of half of a debt she had provided against.she now believes the other half of the debt to be bad and wishes to write it off.she also wishes to maintain her allowance at 2 percent of receivables.
Required:journal entries & total charge to income statement in respect of these items.
In the allowance for receivables
B/f is 1250
C/f is 1250 - 150 (received) - 150 (written off) = 950
note: no new debts provided against
irrecoverable debts 300 (1250 - 950) (decrease in allowance)

Q3. A has opening balance on provision A/c of 1200. Receivables balance is 30000. At the end of year 150 was received in respect of a debt he had provided against.The other half was written off. Pass the journal entries.

In this question we don't know if A provided any new debts, if s/he didn't then we can assume:
In the allowance for receivables
B/f is 1,200
C/f is 1,200 - 150 (received) - 150 (written off) = 900
irrecoverable debts 300 (1200 - 900) (decrease in allowance)

Hope this will help

Sorry, I still have one question about your questoin 1.
You didn't seem to take this factor "Another amount of 170 went bad." into consideration. So do you think that's an irrelevant figure in this question? Would like to hear your thoughts on this. Many thanks