Accounting Online Program Certification Practice Test

What is the net balance of the allowance for doubtful debts at 30 June 20X6?

1. £72,000

2. £60,000

3. £48,000

4. £76,000

The correct answer is: £60,000

To determine the net balance of the allowance for doubtful debts at 30 June 20X6, it is essential to calculate the figure based on expected uncollectible receivables. The allowance for doubtful debts reflects a conservative estimate of the portion of accounts receivable that may not be collectible, which is a fundamental concept in accrual accounting. In this context, if the appropriate allowance for doubtful debts after considering various factors such as historical collection patterns, the current economic environment, and specific customer information is established, we would analyze any changes made to the allowance account during the period in question. The ending balance is derived from adjusting the beginning balance with any additional provisions made or write-offs recognized during the financial year. Typically, the net balance will be arrived at by considering any previous balance therein, adjusting for write-offs confirmed during the period, and adding any new provisions calculated through the percentage of current receivables that are deemed uncollectible. This value is vital for understanding the true realizable value of accounts receivable on the balance sheet. Therefore, if the calculations made reflect an understanding that proper estimation methods and criteria were applied leading to a final figure of £60,000, this figure would represent the net allowance at the end of the stated period