Question

Accounting for Accounts Receivable 15 & Suria commenced business on 1 January 20X0. At year end, 31 December 20X0, the accounts receivable balance was RM10,000. In addition, she found that it was necessary to create an allowance for doubtful debts of RM960. ro During the year ended 31 December 20X1, an amount totalling RM840 proved to be bad and was written off. The total of accounts receivable as at 31 December 20X1 was RM27,600 (after bad debts had been written off). It was decided to provide for doubtful debts up to 5% of accounts receivable. AS In 20X2, RM3,600 in debts was written off during the year. As at 31 December 20X2, total debts outstanding were RM24,000 (after bad debts had been written off). The allowance for doubtful debts is to be maintained at 5% of accounts receivable. You are required to show the following for the year ended 31 December 20X0, 20X1 and 20X2: (a) Accounts receivable accounts (b) Allowance for doubtful debts account (c) Statement of profit or loss (extract) (d) Statement of financial position (extract)

A)Accounts receivable accounts
B) Allowance for doubtful debts account.
C) Statement of profit or loss (extract).
D) Statement of financial position(extract).

Answer 1

1. Accounts Receivable Account

Accounts Receivable Account- 31/12/20X0
To, balance b/d	0
		By, Balance c/f	10,000

Accounts Receivable Account- 31/12/20X1
To, balance b/d	10,000	By, Bad Debt	840
		By, Balance c/f	27,600

Accounts Receivable Account- 31/12/20X2
To, balance b/d	27,600	By, Bad Debt	3,600
		By, Balance c/f	24,000

2. Allowance for Doubtful Debt Account

Allowance for Doubtful Debt Account - 31/12/20X0
		By, balance b/d	0
		By, Profit & Loss a/c	960
To, Balance c/f	960

Allowance for Doubtful Debt Account - 31/12/20X1
To, Bad Debt A/c	840	By, balance b/d	960
		By, Profit & Loss a/c	1260
To, Balance c/f	1380

Allowance for Doubtful Debt Account - 31/12/20X2
To, Bad Debt A/c	1380	By, balance b/d	1380
		By, Profit & Loss a/c	1200
To, Balance c/f	1200

3. Statement of Profit & Loss Account

Extract of Statement of Profit & Loss Account- 31/12/20X0
Revenue
Expenses
Provision for Bad & doubtful Debt	960

Extract of Statement of Profit & Loss Account- 31/12/20X1
Revenue
Expenses
Provision for Bad & doubtful Debt	1,260

Extract of Statement of Profit & Loss Account- 31/12/20X2
Revenue
Expenses
Provision for Bad & doubtful Debt	1,200
Bad debt written off	2,220

4. Extract of Financial Position

Extract of Financial Position- 31/12/20X0
Liabilities	Amount	Assets	Amount
		Accounts Receivable	10,000
		Less:- Allowance for Doubtful Debt	(960)

Extract of Financial Position- 31/12/20X1
Liabilities	Amount	Assets	Amount
		Accounts Receivable	27,600
		Less:- Allowance for Doubtful Debt	(1,380)

Extract of Financial Position- 31/12/20X2
Liabilities	Amount	Assets	Amount
		Accounts Receivable	24,000
		Less:- Allowance for Doubtful Debt	(1,200)