Question
Whitfield Retailers had an Accounts Receivable balance of $8,000 (debit) brought forward from February 2025. The Sales Revenue account started March 2025 with a nil balance. During March 2025, the following transactions occurred:
- Mar 5 — Sold goods on credit to customers, $15,000
- Mar 10 — Received cash from customers in part settlement of their accounts, $10,000, and allowed them a settlement discount of $500
- Mar 18 — Sold further goods on credit to customers, $6,000
- Mar 20 — A customer returned faulty goods originally sold on credit, $1,200 (Whitfield records returns in a separate Sales Returns and Allowances account)
- Mar 22 — Made a cash sale (no credit involved), $2,000
- Mar 25 — Wrote off a customer balance as an uncollectible bad debt, $800
Required: Prepare the Accounts Receivable account and the Sales Revenue account for March 2025 in T-account (two-sided) format, including the balance brought down and carried down where applicable. Show each entry with the correct particulars (naming the other account involved), date, and amount on the correct side.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IFRS 9 — expected credit losses
The allowance is an estimate of receivables that will not be collected, recognised before any specific account is known to have failed. Keep the two mechanics apart: setting or adjusting the allowance affects profit, whereas writing a specific account off against an existing allowance does not.
Common mistakes
- Recording the full estimate as the expense when the allowance already carries a balance — under the balance-sheet approach the entry is the movement needed, not the target.
- Taking a write-off of a specific debt to expense a second time when an allowance already exists.
- Reducing the receivable directly and leaving no allowance account, which loses the gross amount.
Further readingIFRS 9: expected credit losses