Week 6 seminar questions

1. At 1 July 2020 Pooh’s allowance for receivables was £48,000. At 30 June 2021 trade
receivables were £838,000. Pooh decided to write off £72,000 of these debts and
adjust the allowance for receivables to £60,000. What are the figures to be included
in Pooh’s statement of Financial Position at 30 June 2021?

A trade receivables £838,000 allowance for receivables £60,000

B trade receivables £766,000 allowance for receivables £60,000
C trade receivables £766,000 allowance for receivables £108,000
D trade receivables £838,000 allowance for receivables £108,000

2. At 30 September 2021 Piglet’s trade receivables balance was £230,000. He wants to

write off Emily’s debt of £450 and Lulu’s debt of £980. He wants to maintain a
general allowance of 5% of receivables. The allowance for receivables at the start of
the year was £11,700. What amount will be charged or credited to his Statement of
Profit or Loss for the year ended 30 September 2021 for the allowance for
irrecoverable debts?

A £271 income
B £271 expense
C £11,429 expense
D £11,429 income

3. An increase in the allowance for receivables results in:

A an increase in net current assets

B a decrease in net current assets
C an increase in sales
D a decrease in drawings

4. Which of the following is NOT a benefit of providing credit to customers?

A may result in increased sales

B encourages customer loyalty
C attracts new customers
D improves the cashflow of the business