Chapter 8

Question 1

Disaster plc’s trial balance shows trade receivables of £50,000. However, no adjustment has been
made for the following items.
(1) £3,250 from J Crisis & Sons which has gone into liquidation. The amount is considered
irrecoverable.
(2) An increase in the allowance for receivables of £2,000.
(3) Cash received from P Chaos of £2,500 which had previously been written off.
Requirement
What is the trade receivables account balance after posting the above adjustments?
A £50,500
B £50,200
C £46,750
D £49,250

Answer 1

C - doesn’t include the second 2 because the trade receivables nominal ledger balance doesn’t net off the allowances yet.

Question 2

3. Enigma plc has reduced its allowance for receivables by £600.
   Indicate whether the following statements are true or false.
   Requirements
   This will increase gross profit by £600.
   A True
   B False
   This will increase net profit by £600.
   C True
   D False

Answer 2

B C