BÀI GIẢNG kế TOÁN QUỐC tế chapter 12 irrecoverable debts and allowances

Chapter 12

IRRECOVERABLE DEBTS AND
ALLOWANCES


Learning Objectives
1. Irrecoverable debts and receivables
allowances
2. Accounting for irrecoverable debts and
receivables allowances

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Irrecoverable debts and receivables
allowances
•

A receivable should only be classed as an asset if it is recoverable.

Irrecoverable debts

Receivables allowances

If definitely irrecoverable, the
prudence concept (IAS 1) dictates
that it should be written off to the
income statement as an
irrecoverable debt.

If uncertainty exists as to the
recoverability of the debt,
prudence dictates that an
allowance should beset up. This
is offset against the receivables
balance on the statement of
financial position.

•Allowances can either be specific, against a particular receivable,
or general, against a proportion of all receivables not specifically
allowed for, based on past experience.
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Accounting for irrecoverable debts
and receivables allowances
General allowances
When calculating the general allowance to be made, the
following order applies.

Note. Only the movement in the general allowance needs to be
accounted for.

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Accounting for irrecoverable debts and
receivables allowances
If a reduction in the receivables allowance is required,
then:

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Accounting for irrecoverable debts and
receivables allowances
Subsequent recovery of debts
If an irrecoverable debt is recovered, having previously
been written off, then:

If the recovery is in a later accounting period, then the
credit is to irrecoverable debts recovered.

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