Jane has trade receivables at 31 August 2019 of £715,000. There are known irrecoverable debts at that date amounting to £35,000. Jane had an allowance for receivables of £32,000 at 31 August 2018. Jane wishes to create an allowance for receivables at 31 August 2019 of 5% of trade receivables. What is the net figure that Jane will disclose in her statement of financial position for trade receivables at 31 August 2019?

Question

Quizplus · Accepted Answer

The net trade receivables are calculated by deducting the irrecoverable debts and the allowance for receivables from the total trade receivables. First, deduct the irrecoverable debts (£35,000) from the trade receivables (£715,000), resulting in £680,000. Then, calculate the new allowance for receivables as 5% of £680,000, which is £34,000. Finally, subtract the allowance (£34,000) from £680,000 to get £646,000.

Jane Has Trade Receivables at 31 August 2019 of £715,000