Irrecoverable debts and allowance for irrecoverable debts Quiz

B. Debts that are unlikely to be collected This is the definition of irrecoverable debts. The other options describe overdue debts, prepayments, or personal debts, not irrecoverable debts.

B. Debit Profit and Loss Account £500, Credit Debtors Control £500 This entry records the write-off of the debt, reducing the debtors control account and increasing the expenses in the profit and loss account.

C. Debit Cash Book £300, Credit Debtors Control £300 This entry records the receipt of the recovered debt, increasing the cash book and reducing the debtors control account.

B. To match the expenses with the revenues in the period they are incurred The allowance for irrecoverable debts is maintained to apply the matching concept, ensuring that the estimated expenses are recorded in the same period as the related sales revenue.

A. Debit Profit and Loss Account £1,000, Credit Allowance for Irrecoverable Debts £1,000 This entry records the creation of the allowance, increasing the expenses in the profit and loss account and increasing the allowance for irrecoverable debts.

B. To provide a more accurate valuation of the debtors control account The allowance for irrecoverable debts is used to estimate the amount of debts that are unlikely to be collected, providing a more accurate valuation of the debtors control account.

B. Debit Profit and Loss Account, Credit Allowance for Irrecoverable Debts This entry reduces the allowance for irrecoverable debts, as the actual irrecoverable debts written off were less than the allowance, and reduces the expenses in the profit and loss account.

A. The recovered amount is recorded as income in the profit and loss account The recovered amount is recorded as income in the profit and loss account, as it represents a reversal of the previously written-off expense.

D. To reduce the amount of taxable profit The primary purpose of maintaining an allowance for irrecoverable debts is to apply the matching concept and provide a more accurate valuation of the debtors control account, not to reduce the amount of taxable profit.

A. Debit Profit and Loss Account £600, Credit Allowance for Irrecoverable Debts £600 This entry records the creation of the allowance based on the percentage of the debtors control account balance, increasing the expenses in the profit and loss account and increasing the allowance for irrecoverable debts.

B. A portion of the debt is written off as irrecoverable, and the remaining portion is left as a receivable The accounting treatment for a partially irrecoverable debt is to write off the irrecoverable portion and leave the remaining portion as a receivable in the debtors control account.

A. Debit Allowance for Irrecoverable Debts, Credit Profit and Loss Account This entry increases the allowance for irrecoverable debts, as the actual irrecoverable debts written off were more than the allowance, and increases the expenses in the profit and loss account.

A. The allowance for irrecoverable debts is a contra-asset account that reduces the debtors control account The allowance for irrecoverable debts is a contra-asset account that is subtracted from the debtors control account to provide a more accurate valuation of the debtors control account.

B. Debit Profit and Loss Account, Credit Allowance for Irrecoverable Debts This entry reduces the allowance for irrecoverable debts, as the actual irrecoverable debts written off were less than the allowance, and reduces the expenses in the profit and loss account.

A. The recovered amount is recorded as income in the profit and loss account The recovered amount is recorded as income in the profit and loss account, as it represents a reversal of the previously written-off expense, regardless of the adjustment to the allowance for irrecoverable debts.