* 0019655310810 *

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10
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,

3 Usman began selling goods on credit on 1 January 2021. He maintains an allowance for
irrecoverable debts at each financial year end.

(a) Explain two accounting concepts which are applied when making an allowance for
irrecoverable debts.

1 ................................................................................................................................................

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2 ................................................................................................................................................

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[4]

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(b) State two factors which should be considered when deciding the percentage that should be
used for an allowance for irrecoverable debts.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

Additional information

The following information is available about total trade receivables at the financial years ended
31 December:

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$
2021 18 200
2022 17 300
2023 19 600

The allowance for irrecoverable debts has been maintained at 4% each year.
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11
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(c) Prepare the allowance for irrecoverable debts account for the years 2022 and 2023.

Allowance for irrecoverable debts account

$ $
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[5]

Additional information
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On 5 January 2024 it was decided to write off $3470 as irrecoverable, being the balance on the
account of a credit customer, T Limited.

However, on 29 March 2024 a cheque was received in full settlement of the amount owed by
T Limited.

(d) State the double-entry necessary to record the following transactions:

Writing off the account on 5 January 2024

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The settlement of the amount due on 29 March 2024

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[4]

[Total: 15]

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9706/23/M/J/24 [Turn over