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10 Trade Receivables and Trade Payables
10 Trade Receivables and Trade Payables
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1/15

When a credit customer is bankrupt and only makes a partial payment as full settlement for the debt, _________________.

the portion of the debt that is not collected is written off to the impairment loss on trade receivables

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the entire amount is written off to the allowance for impairment loss of trade 

receivables

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the portion of the debt that is not collected is written off to the allowance 

for impairment of trade receivables

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the entire amount is written off to the impairment loss on trade receivables

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2/15

Recording the allowance for impairment of trade receivables is in accordance with the prudence theory that states that  ______________.

assets are not overstated

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assets are not understated

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income is not overstated

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income is not understated

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3/15

The allowance for impairment of trade receivables is shown in the ______________.

trading portion of the statement of financial performance

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profit and loss portion of the statement of financial performance

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current assets section of the statement of financial position

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current liabilities section of the statement of financial position

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4/15

Impairment loss on trade receivables is shown in the ______________.

trading portion of the Statement of Financial Performance

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expenses portion of the Statement of Financial Performance

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current assets section of the Statement of Financial Position

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current liabilities section of the Statement of Financial Position

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5/15

Trade receivables is presented as net trade receivables which is ______________.

trade receivables plus impairment loss on trade receivables

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trade receivables plus allowance for impairment of trade receivables

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trade receivables less allowance for impairment of trade receivables

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trade receivables less impairment loss on trade receivables

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6/15

When the balance in the allowance for impairment of trade receivables increases at the end of a financial period compared to the beginning of the period, there is ______________.

no effect on profit for the period

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a decrease in profit for the period

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a decrease in gross profit for the period and profit for the period

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an increase in profit for the period

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7/15

Why does a business give trade discounts?

to increase cash payment

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to encourage customers to make prompt payment

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to reduce debtor balance

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to increase sales

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8/15

The effect of writing-off a trade receivable balance in the current period where an allowance for impairment of trade receivable had been made in the prior accounting period, ______________ in the current accounting period.

increases profit

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decreases profit

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has no effect on total assets or profit

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increases profit

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9/15

The following accounts and their balances were extracted from the books of ABC Trading as at 30 June 2022:

Trade receivables: $20,000

Allowance for impairment of trade receivables: $800

It was estimated that 5% of trade receivables may be uncollectible.

What would be the amount for allowance for impairment of trade receivables be shown in the statement of financial position?

$800

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$200

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$1,000

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$1,800

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10/15

The following accounts and their balances were extracted from the books of ABC Trading as at 30 June 2022:

Trade receivables: $20,000

Allowance for impairment of trade receivables: $800

It was estimated that 5% of trade receivables may be uncollectible.

What would be the amount that would be shown as an expense in the statement of financial performance?

$800

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$200

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$1,000

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$1,800

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11/15

The following accounts and their balances were extracted from the books of ABC Trading as at 30 June 2022:

Trade receivables: $20,000

Allowance for impairment of trade receivables: $800

It was estimated that 5% of trade receivables may be uncollectible.

The name of the expense shown in the statement of financial performance is _____________________

Allowance for impairment of trade receivables

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Reversal of impairment loss on trade receivables

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Impairment loss on inventory

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Impairment loss on trade receivables

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12/15

The following accounts and their balances were extracted from the books of ABC Trading as at 30 June 2022:

Trade receivables: $20,000

Allowance for impairment of trade receivables: $800

It was estimated that 5% of trade receivables may be uncollectible.

On 30 June 2022, it was discovered trade receivable Tan who owed $600 was declared bankrupt. ABC Trading has not yet written off this amount owing. The journal entry to write off the amount owing by Tan is:

DR Trade receivable Tan  

CR Allowance for impairment of trade receivables

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DR Impairment loss on trade receivables  

CR Trade receivable Tan

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DR Impairment loss on trade receivables  

CR Allowance for impairment of trade receivables

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DR Allowance for impairment of trade receivables

CR Trade receivable Tan

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13/15

The following accounts and their balances were extracted from the books of ABC Trading as at 30 June 2022:

Trade receivables: $20,000

Allowance for impairment of trade receivables: $800

It was estimated that 5% of trade receivables may be uncollectible.

After writing off Trade Receivable Tan who owed $600 has been completed, the amount necessary to adjust the allowance for impairment of trade receivables is __________________

$800

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$1,000

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$970

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$770

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14/15

What are the journal entries necessary for decreasing the allowance for impairment of trade receivables by $100?

DR trade receivables

CR allowance for impairment of trade receivables

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DR allowance for impairment of trade receivables

CR impairment loss on trade receivables

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DR impairment loss on trade receivables

CR allowance for impairment of trade receivables

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DR allowance for impairment of trade receivables

CR trade receivables

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15/15

The accounting theory that supports the creation of the allowance for impairment of trade receivables is the __________ theory.

Accrual
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Prudence
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Accounting entity

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Materiality

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