Allowance for Doubtful Debts

Wei's financial year ends on 31 December. The following information is available for the last three
years of trading:
2006 2007 2008
RM RM RM
Total of accounts receivable before writing off
400,500 427,000 416,000
bad debts

Bad debts written off at year end 18,500 25,500 19,000

Specific allowance for doubtful debts 20,000 25,000 15,000

Allowance for doubtful debts, as a percentage of

4% 2% 5%
accounts receivable

REQUIRED
(a) Prepare the Allowance for Doubtful Debts account for each of the years ending 31 December
2006, 2007 and 2008. The balance on this account at 1 January 2006 was RM26.000. All
workings must be clearly shown.
(b) Show, in a Statement of Financial Position extract, how debtors would appear at 31 December
2007.

Included in bad debts written off at 31 December 2006 was RM2,500 in respect of debtor Ling. On
15 March 2008, Wei received a cheque for RM2,500 from Ling.

REQUIRED
(c) Prepare journal entries to record this transaction. Narratives are not required.

Answer Guide: (a) 2006 RM8,480 (Exp.) (b) RM368,970

2007 RM1,950 (Inc.)
2008 RM1,570 (Exp.)