4.4. Irrecoverable debts and provision for doubtful debts
A subsection of Accounting, 7707, through 4. Accounting procedures
Listing 10 of 34 questions
Seok buys and sells goods on credit. He has three credit customers and allows one of them, Naomi, trade discount of 10%. All customers pay Seok by bank transfer. The following balances were extracted from Seok’s sales ledger at 1 August 2023. $ Naomi Siena Bwana The following transactions took place in August 2023. Aug 3 Sold goods on credit, to Naomi, list price $410 Sold goods on credit, $89, to Bwana Naomi returned goods, list price $20 Naomi paid $423 in full settlement of the amount she owed at 1 August Sold goods on credit, $180, to Bwana Sold goods on credit, to Naomi, list price $230 Bwana returned goods, $19 Bwana paid $400 REQUIRED Prepare the sales journal for August 2023. Total the journal and indicate the ledger account where the total would be posted. Seok Sales journal Date Details $ $ Prepare the sales returns journal for August 2023. Total the journal and indicate the ledger account where the total would be posted. Seok Sales returns journal Date Details $ $ Prepare the account for Naomi for August 2023 as it would appear in the books of Seok. Balance the account and bring down the balance at 1 September 2023. Seok Naomi account Date Details $ Date Details $ On 31 August Seok decided to write off the amount owing by Siena as an irrecoverable debt. REQUIRED Prepare Seok’s sales ledger control account for August 2023. Balance the account and bring down the balance at 1 September 2023. Seok Sales ledger control account Date Details $ Date Details $
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THEORY
2023
Paper 2, Variant 2
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Logan is a trader who sells goods on credit. His year end is 30 September. Logan has provided the following information. $ At 1 October 2022 Inventory 8 400 Trade receivables 7 500 Other receivables (rent prepaid) For the year ended 30 September 2023 Rent charge for the year 4 940 Bank payments for rent 1 December 2022 2 460 1 June 2023 2 490 At 30 September 2023 Inventory 8 675 Trade receivables 8 700 Other receivables ? Irrecoverable debts to be written off The provision for doubtful debts is to be maintained at 4% of trade receivables. REQUIRED Prepare the inventory account for the year ended 30 September 2023. Logan Inventory account Date Details $ Date Details $ Prepare the provision for doubtful debts account for the year ended 30 September 2023. Balance the account at 30 September 2023 and bring down the balance at 1 October 2023. Logan Provision for doubtful debts account Date Details $ Date Details $ Prepare the rent payable account for the year ended 30 September 2023. Balance the account at 30 September 2023 and bring down the balance at 1 October 2023. Logan Rent payable account Date Details $ Date Details $ State how: the prudence principle is applied to the valuation of Logan’s inventory the matching principle is applied when the rent payable account is prepared Logan is considering buying business premises instead of renting. He would request a long-term bank loan to finance the purchase of the premises. REQUIRED Advise Logan whether he should purchase business premises using a long-term bank loan. Justify your answer with advantages and disadvantages of purchasing business premises using a long-term bank loan.
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THEORY
2023
Paper 2, Variant 3
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Questions Discovered
34