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level: Payables & Receivables

Questions and Answers List

level questions: Payables & Receivables

QuestionAnswer
What is Working Capital?The difference between current assets and current liabilities. It is a measure of liquidity.
How is the receivables expense charge for the SPL calculated?(Closing allowance less opening allowance) plus irrecoverable debt
How is the receivables expense for the SFP calculated?(receivables total less irrecoverable debt) less closing allowance
What are the entries for recording an irrecoverable debt when an allowance has been made?Dr. Allowance for receivables Cr. Receivables
What entries are required to first create an allowance for receivables?Dr. Irrecoverable Debts (full amount) Cr. Allowance for receivables (full amount)
On which statement does the allowance for receivables appear ?On the SFP as a reduction to receivables (Cr)
On which statement does Irrecoverable and doubtful debts appear?On the SPL as an expense (Dr)
What is a payable?"A person or institution to whom a business owes money."
What is a liability?An obligation to transfer economic benefits as a result of past transactions or events.
What is the entry for writing off an irrecoverable debt?Dr. Irrecoverable debts Cr. Receivables