19.4A A business, which started trading on 1 January 2022, adjusted its allowance for doubtful debts at the end of each year on a percentage basis, but each year the percentage rate is adjusted in accordance with an analysis of the business's actual debt collection experience. The following details are available for the three years ended 31 December 2022, 2023 and 2024: Bad debts written off year to 31 Trade receivables at 31 December after December bad debts written off 2022 2023 2024 £ 12,380 22,640 31,700 £ 92,000 136,000 169,000 Percentage allowance for doubtful debts 4% 5% 2.5% You are required to show: a. The allowance for doubtful debts accounts and bad debts expense accounts for each of the three years. b. Balance sheet extracts as at 31 December 2022, 2023 and 2024.

19.4A A business, which started trading on 1 January 2022, adjusted its allowance for doubtful debts at the end of each year on a percentage basis, but each year the percentage rate is adjusted in accordance with an analysis of the business's actual debt collection experience. The following details are available for the three years ended 31 December 2022, 2023 and 2024: Bad debts written off year to 31 Trade receivables at 31 December after December bad debts written off 2022 2023 2024 £ 12,380 22,640 31,700 £ 92,000 136,000 169,000 Percentage allowance for doubtful debts 4% 5% 2.5% You are required to show: a. The allowance for doubtful debts accounts and bad debts expense accounts for each of the three years. b. Balance sheet extracts as at 31 December 2022, 2023 and 2024.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.

Question

19.4A A business, which started trading on 1 January 2022, adjusted its allowance for doubtful
debts at the end of each year on a percentage basis, but each year the percentage rate is adjusted
in accordance with an analysis of the business's actual debt collection experience. The following
details are available for the three years ended 31 December 2022, 2023 and 2024:
Bad debts written off year to 31 Trade receivables at 31 December after
December
bad debts written off
2022
2023
2024
£
12,380
22,640
31,700
You are required to show:
£
92,000
136,000
169,000
Percentage allowance for
doubtful debts
4%
5%
2.5%
a. The allowance for doubtful debts accounts and bad debts expense accounts for each of the
three years.
b. Balance sheet extracts as at 31 December 2022, 2023 and 2024.

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Step 3 : Bad debts expense account

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Step 4 : Balance Sheet Extract as at 31st December 2022 , 2023 and 2024

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