I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART D: RECORDING TRANSACTIONS AND EVENTS 

 

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2.2 Determining the allowance for receivables 

The methods of determining the allowance for trade receivables fall under IAS 39/IFRS 9 as part of an 

impairment review of trade receivables, and can be quite complex. Fortunately, these are beyond the 

scope of this syllabus. In this paper, the allowance for receivables is likely to be expressed simply as a 

percentage of trade receivables, eg 'an allowance equivalent to 2% of trade receivables'.  

The allowance against the trade receivables balance is made after writing off any irrecoverable debts.  

2.3 Accounting treatment in the financial statements 

The accounting treatment for an allowance for receivables is as follows.  

(a) 

When an allowance is first made, the amount of this initial allowance is charged as an expense in 

the statement of profit or loss for the period in which the allowance is created. 

(b) 

When an allowance already exists, but is subsequently increased in size, the amount of the