level: Payables & Receivables
Questions and Answers List
level questions: Payables & Receivables
| Question | Answer |
|---|---|
| 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 |