The following information is available for sole trader Koshoh for the year ended 31 December 2019:

Ksh

Draft receivables debit balances as at 31 December 2019

632,150

Allowances for receivables as at 1 January 2019

48,500

Draft irrecoverable debts written off during the year

41,210

Irrecoverable debts previously written off recovered during the year

3,520

As at 31 December 2019 Koshoh reviewed his receivables listing and decided the following (none of these adjustments have been reflected in the draft figures above):

An additional Ksh11,790 of debts should be written off as irrecoverable;

Koshoh considers that Ksh15,380 of debts should be made the subject of a specific allowance;

The general allowance for receivables should be set at 5% of the remaining receivable balances.

You are required to:

Prepare the following for Koshoh for the year ended 31 December 2019:

i.The allowance for receivables T account;

Koshoh allowance for receivables T account for the year ended 31 December 2019

Draft receivables debit balances as at 31 december 2019632,150

ii.Irrecoverable debts expense T account;

iii.Outline your understanding of why businesses set up specific allowance for receivables;

The following information is available for sole trader Koshoh for the year ended 31 December 2019:

Ksh

Draft receivables debit balances as at 31 December 2019

632,150

Allowances for receivables as at 1 January 2019

48,500

Draft irrecoverable debts written off during the year

41,210

Irrecoverable debts previously written off recovered during the year

3,520

As at 31 December 2019 Koshoh reviewed his receivables listing and decided the following (none of these adjustments have been reflected in the draft figures above):

An additional Ksh11,790 of debts should be written off as irrecoverable;

Koshoh considers that Ksh15,380 of debts should be made the subject of a specific allowance;

The general allowance for receivables should be set at 5% of the remaining receivable balances.

You are required to:

Prepare the following for Koshoh for the year ended 31 December 2019:

i.The allowance for receivables T account;

Koshoh allowance for receivables T account for the year ended 31 December 2019

Draft receivables debit balances as at 31 december 2019632,150

ii.Irrecoverable debts expense T account;

iii.Outline your understanding of why businesses set up specific allowance for receivables;