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11 Allowance for impairment of trade receivables
This quiz is designed to help students revise accounting principles related to trade receivables. It covers topics such as impairment losses, allowances for impairment of trade receivables, and the impact of customer bankruptcies on financial statements. By focusing on concepts like matching expenses with revenues, recognizing impairment losses, and calculating net trade receivables accurately, this quiz provides a valuable opportunity for students to test their understanding and prepare for assessments.
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A) To decrease revenue
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Add RecommendationAdd TagsView All Assigned TagsB) To reduce customer base
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Add RecommendationAdd TagsView All Assigned TagsC) To increase revenue
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Add RecommendationAdd TagsView All Assigned TagsD) None of the above
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Which of the following accounting principles supports the adjustments made for customers suspected unable to pay debts?
A) Matching
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Add RecommendationAdd TagsView All Assigned TagsB) Materiality
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Add RecommendationAdd TagsView All Assigned TagsC) Consistency
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Add RecommendationAdd TagsView All Assigned TagsD) Objectivity
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A) Trade receivables balance
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Add RecommendationAdd TagsView All Assigned TagsB) Economic outlook
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Add RecommendationAdd TagsView All Assigned TagsC) Credit terms and cash discount
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Add RecommendationAdd TagsView All Assigned TagsD) Existing customers' favorite color
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A) Uncollectible debts in the future
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Add RecommendationAdd TagsView All Assigned TagsB) Immediate future collections
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Add RecommendationAdd TagsView All Assigned TagsC) Trade discounts calculation
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Add RecommendationAdd TagsView All Assigned TagsD) Historical revenue data
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How is a decrease in the allowance for impairment of trade receivables treated in the Statement of Financial Performance?
A) Treated as an increase in revenue
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Add RecommendationAdd TagsView All Assigned TagsB) Treated as a reduction against expenses
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Add RecommendationAdd TagsView All Assigned TagsC) Treated as an increase in expense
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Add RecommendationAdd TagsView All Assigned TagsD) Ignored in financial statements
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A) trading portion of the Statement of Financial Performance
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Add RecommendationAdd TagsView All Assigned TagsB) profit and loss portion of the Statement of Financial Performance
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Add RecommendationAdd TagsView All Assigned TagsC) current assets section of the Statement of Financial Position
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Add RecommendationAdd TagsView All Assigned TagsD) current liabilities section of the Statement of Financial Position
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A) trading portion of the Statement of Financial Performance
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Add RecommendationAdd TagsView All Assigned TagsB) profit and loss portion of the Statement of Financial Performance
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Add RecommendationAdd TagsView All Assigned TagsC) current assets section of the Statement of Financial Position
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Add RecommendationAdd TagsView All Assigned TagsD) current liabilities section of the Statement of Financial Position
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A) trade receivables plus impairment loss on trade receivables
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Add RecommendationAdd TagsView All Assigned TagsB) trade receivables plus allowance for impairment of trade receivables
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Add RecommendationAdd TagsView All Assigned TagsC) trade receivables less allowance for impairment of trade receivables
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Add RecommendationAdd TagsView All Assigned TagsD) trade receivables less impairment loss on trade receivables
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On 31 December 2025, the firm decided to create an allowance for impairment of trade receivables. What are the accounting entries?
A) Dr Impairment loss on trade receivables; Cr Trade receivables.
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Add RecommendationAdd TagsView All Assigned TagsB) Dr Allowance on impairment loss on trade receivables; Cr Trade receivables.
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Add RecommendationAdd TagsView All Assigned TagsC) Dr Impairment loss on trade receivables; Cr Allowance for impairment loss on trade receivables.
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Add RecommendationAdd TagsView All Assigned TagsD) Dr Allowance for impairment loss on trade receivables; Cr Impairment loss on trade receivables.
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On 31 May 2025, debtor John who owed the firm $450 went bankrupt. No allowance or impairment on the amount was made in the previous year. What are the accounting entries when the firm decided to write the debt off?
A) Dr Impairment loss on trade receivables; Cr Trade receivables - John .
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Add RecommendationAdd TagsView All Assigned TagsB) Dr Allowance on impairment loss on trade receivables; Cr Trade receivables -John .
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Add RecommendationAdd TagsView All Assigned TagsC) Dr Impairment loss on trade receivables; Cr Allowance for impairment loss on trade receivables.
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Add RecommendationAdd TagsView All Assigned TagsD) Dr Allowance for impairment loss on trade receivables; Cr Impairment loss on trade receivables.
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An allowance for impairment of trade receivables amounting to $2000 was already made in the books of Xing Ying. Subsequently a customer Bing Chen who owes the business $900 declared bankruptcy and was only able to pay 40 cents for every dollar it owed. Which of the following reflects the correct entries that should be recorded in the books of Xing Ying?
A) Dr Cash at bank account 360 Cr Trade receivables 360 Dr Allowance for impairment of trade receivables 540; Cr Impairment loss on trade receivables 540
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Add RecommendationAdd TagsView All Assigned TagsB) Dr Cash at Bank 360; Cr Trade receivables 360 Dr Allowance for impairment of trade receivables 540; Cr Trade receivables 540
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Add RecommendationAdd TagsView All Assigned TagsC) Dr Cash at Bank 360; Cr Trade receivables 360 Dr Impairment of trade receivables 360; Cr Allowance for Impairment of trade receivables 360
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Add RecommendationAdd TagsView All Assigned TagsD) Dr Trade receivable 540; Cr Cash at bank 540 Dr Allowance for impairment of trade receivables 360; Cr Trade receivables 360
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During the year ended 31 December 2025, debtor Ali who owed $300 was declared bankrupt. Allowance on impairment on debt due from Ali was made on 31 December 2024. What are the accounting entries when the firm decided to write off the debt?
A) Dr Impairment loss on trade receivables; Cr Trade receivables - Ali.
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Add RecommendationAdd TagsView All Assigned TagsB) Dr Allowance on impairment loss on trade receivables; Cr Trade receivables -Ali .
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Add RecommendationAdd TagsView All Assigned TagsC) Dr Impairment loss on trade receivables; Cr Allowance for impairment loss on trade receivable
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Add RecommendationAdd TagsView All Assigned TagsD) Dr Allowance for impairment loss on trade receivables; Cr Impairment loss on trade receivable.
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The following is an extract from the trial balance of Alco Trading on 31 December 2024:
The allowance is to be maintained at 5% of debtors
How would the impairment loss on trade receivable be shown in the statement of financial performance?
a) an increase in expense of $500
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Add RecommendationAdd TagsView All Assigned Tagsb) an increase in expense of $1,000
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Add RecommendationAdd TagsView All Assigned Tagsc) an increase of income of $500
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Add RecommendationAdd TagsView All Assigned Tagsd) a decrease in expense of $500
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Tarzan’s trade receivable balance at the end of the year were $75,600, including $2 400 owed by Manson. This debt is now written off as bad. It is then decided to set up an allowance for impairment of trade receivables of 2% of the trade receivables at the end of the year.
What will be the net trade receivables figure in the Statement of Financial Position?
A) $71 688
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Add RecommendationAdd TagsView All Assigned TagsB) $71 736
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Add RecommendationAdd TagsView All Assigned TagsC) $74 088
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Add RecommendationAdd TagsView All Assigned TagsD) $74 136
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The trial balance of AZ trading showed the following:
The allowance is to be maintained at 5% of trade receivables.
How would the allowance be shown in the statement of financial position?
(a) A deduction from trade receivables of $500.
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Add RecommendationAdd TagsView All Assigned Tags(b) A deduction from trade receivables of $875.
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Add RecommendationAdd TagsView All Assigned Tags(c) A deduction from trade receivables of $1,000.
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Add RecommendationAdd TagsView All Assigned Tags(d) A deduction from trade receivables of $2,500.
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