QUESTION 8

REQUIRED:

A customer was bankrupt after the financial reporting date and a material amount of the accounts receivable will not be recovered. Which one of the following statements are correct regarding the treatment of the event?

1.The financial statements must not be adjusted as this event occurred after the financial year end.

2.The financial statements must be adjusted and the accounts receivable amount must be written off as the bankruptcy is indicative of events that occurred during the financial year.

3.The account must not be written off, however a provision for a liability must be raised.

4.A contingent liability note must be disclosed with regards to the bankruptcy of the customer.