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5(a) NT 3
General Journal
Date Details Debit Credit
$ $
May 5 Irrecoverable debts 600 (1)
LW 600 (1)
Account written off as irrecoverable (1)

5(b) NT 2
Extract from income statement for the year ended 31 August 2021

$
Irrecoverable debts (600 + 4100) 4 700 (1)
Provision for doubtful debts (91 500  5%) 4 575 (1)

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5(c) NT 2
Extract from statement of financial position at 31 August 2021

Current assets** $
Trade receivables 91 500
Less Provision for doubtful debts 4 575 (1) OF
86 925 OF **(1) For heading + OF total

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5(d) NT Ledger accounts 8

PB account
Date Details $ Date Details $
2022 2022
* Balance b/d 7 000 July 17 Bank 2 500 } (1)
Irrecoverable debts 4 500 }
7 000 7 000

Irrecoverable debts account

Date Details $ Date Details $
2022 2022
July 17 PB 4 500 (1) OF Aug 31 Income statement 12 900 (1) OF
Aug 31 Trade receivables/
debts written off 8 400 (1)
12 900 12 900

Provision for doubtful debts account

Date Details $ Date Details $
2022 2021
Aug 31 Balance c/d 5 500 Sep 1 Balance b/d 4 575 (1) OF
2022
Aug 31 Income statement 925 (1) OF
5 500 5 500
Sep 1 Balance b/d 5 500 (1)

* No specific date specified

+ (1) Dates

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5(e) Option 1 – charge interest 5

Customers may go elsewhere/competitors may offer better terms/sales may decrease (1)
Customers may not be prepared to pay the interest (1)
May damage relationship with customers (1)
Customers may pay on time/may be encouraged to pay on time to avoid interest charges (1)
Profit/income will be increased because of interest received (1)
Increase in administration costs (1)
Accept other valid points
Max (2)

Option 2 – stop supplies

Overdue balances may never be paid and have to be written off (1)
Customers may go elsewhere/ competitors may offer better terms/sales may decrease (1)
May damage relationship with customers (1)
Accept other valid points
Max (2)

Recommendation (1)

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4(a) PG 13
Sales account

Date Details $ Date Details $

2022 2022
Jul 31 Income statement 377 000 (1) OF Jul 31 Trade receivables 360 000 (1)
___ ___ Cash 17 000 (1)
377 000 377 000

Sales returns account

Date Details $ Date Details $

2022 2022
Jul 31 Trade receivables 13 300 (1) Jul 31 Income statement 13 300
13 300 13 300

Trade receivables account

Date Details $ Date Details $

2021 2022
Aug 1 Balance b/d 28 500 Jul 31 Sales returns 13 300*
2022 Bank 335 100*
Jul 31 Sales 360 000 (1) Discount allowed 6 500*
Bank 4 000 (1) Irrecoverable debts 900*
___ ___ Balance c/d 36 700
392 500 392 500
Aug 1 Balance b/d 36 700 (1) OF

*1 mark for 2 correct items and 2 marks for 4 correct items

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4(a) Irrecoverable debts account

Date Details $ Date Details $

2022 2022
Jul 31 Trade receivables 900 Jul 31 Income statement 900 (1)
900 900

Provision for doubtful debts account

Date Details $ Date Details $

2022 2021
Jul 31 Balance c/d 1 468 Aug 1 Balance b/d 1 140 (1)
2022
____ Jul 31 Income statement 328 (1)
1 468 1 468
Aug 1 Balance b/d 1 468 (1) OF

4(b) PG 2
Extract from statement of financial position at 31 July 2022
Current assets** $
Trade receivables 36 700 (1) OF
less provision for doubtful debts 1 468 OF
35 232 OF **(1)
**For heading + OF total

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4(c) Obtain (credit) references (1) 3

Set credit limit (1)
Sell for cash only / reduce credit sales (1)
Issue invoices / statements of account promptly (1)
Follow up with phone calls / emails etc (1)
Improve or introduce credit control / hire a credit controller (1)
Charge interest on late payment (1)
Refuse further supplies until outstanding balance is paid (1)
Increase level of cash discount (1)
Last resort take legal action (1)
Accept other valid points

Max 3

4(d) Experience of late / non-payment (1) 2

Specific knowledge of customers credit record / credit rating (1)
Length of time debts outstanding / ageing schedule / trade receivables turnover (1)
State of the local economy (1)
Accept other valid points

Max 2

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