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

 EXAM FOCUS POINT 

In the exam it is highly likely that you will have to calculate the increase or decrease in the allowance 

for receivables and show the effect of this on the statement of profit or loss.  

BPP Tutor Toolkit Copy

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CHAPTER 12  

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  IRRECOVERABLE DEBTS AND ALLOWANCES 

 

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2.4 Allowance for receivables: ledger accounting entries 

When an allowance for receivables is first set up, the whole amount is debited to the statement of profit 

or loss. 

In subsequent years, only the movement on the receivables allowance is debited or credited to 

irrecoverable debts expense in the statement of profit or loss. 

When a business first sets up an allowance for receivables, the full amount of the allowance should be 

debited to irrecoverable debts expense as follows. 

DEBIT  

Irrecoverable debts expense (statement of profit or loss) 

CREDIT 

Allowance for receivables (statement of financial position)