1How do you account for credit sale of goods?
Dr Trade receivables Cr Sales revenue
2How do you account for credit sale of services?
Dr Trade receivables Cr Service fee revenue
3What is allowance?
The allowance for impairment of trade receivables is the estimate of the amount of debts (trade receivables balance) likely to be uncollectible
4How is allowance valued?
In accordance to prudence theory, the provision of allowance for impairment of trade receivables is to ensure that the trade receivables balance is not overstated and reflects the net amount that is collectible.
5What is the formula for allowance?
$Estimated \space percentage \space (\%) \times Ending \space trade \space receivables \space balance$
6How is impairment loss on trade receivables valued?
In accordance to matching theory, the expenses incurred must be matched against the income earned in the same period to determine the profit for the period.
7How do you record providing allowance for the first time/increasing allowance
Dr Impairment loss on trade receivables (Exp+) Cr Allowance for impairment of trade receivables (contra-asset+)
8How do you record writing off of trade receivables
Dr Allowance for impairment of trade receivables (contra-asset-) Cr Trade receivables - XXX (CA-)
9How do you record decreasing allowance
Dr Allowance for impairment of trade receivables (contra-asset-) Cr Impairment loss on trade receivables (Exp-)
10If there is an increase in allowance, what happens to other expenses, profit and current assets
Increases, Decreases & Decreases respectively
11If there is an decrease in allowance, what happens to other expenses, profit and current assets
Decreases, Increases & Increases respectively