Accounting Online Program Certification Practice Test

What is the irrecoverable debts expense reported in the statement of profit or loss for the year ended 30 June 20X5?

1. £22,000

2. £37,000

3. £24,000

4. £20,000

The correct answer is: £22,000

To determine the irrecoverable debts expense reported in the statement of profit or loss, it is important to understand how such expenses are calculated. Irrecoverable debts, also known as bad debts, are amounts that a company has deemed uncollectible from its customers and thus need to be written off as an expense. The figure typically represents the total amount of debt that has been determined to be uncollectible during a specific accounting period. This amount is crucial as it directly affects the profitability of the company by reducing the income that can be recognized. In this case, if the answer is £22,000, this amount indicates that it is the net figure calculated based on the uncollectible debts for the period in question. This might have involved reviewing the receivables on hand, determining which specific debts are unlikely to be paid, and accounting for those amounts accordingly. The choice of £22,000 could indicate the company’s assessment process, including past collections patterns, customer payment behavior, and broader economic conditions that may influence a customer's ability to pay. It demonstrates effective credit control and risk management practices in accounting. The other options, presenting different amounts, suggest variations in the evaluation of debts. However, contextually, £22,000 is