Creating an allowance for credit losses.The following is an extract from the accounting records of Jack Traders at 31 December 20.1, the last day of the financial year:Pre-adjustment trial balanceACCOUNTFolDebit RCredit RBalance sheet accounts section Debtors control B9 130 000 Adjustments at 31 December 20.1:Jack Traders wants to create an allowance for credit losses of R6 500. General Ledger of Jack TradersDebtors controlFolDateDetailsAmountDateDetailsFolAmountAllowance for credit losses (a negative asset)DetailsDateDetailsFolAmountDateFolAmountAllowance for credit losses adjustment (an expense account)FolDateDetailsAmountDateDetailsFolAmountProfit and loss accountDateDetailsFolAmountDateDetailsFolAmount

Accounts Receivable It is important duty of the entity to manage the accounts receivables which is…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Creating an allowance for credit losses.

The following is an extract from the accounting records of Jack Traders at 31 December 20.1, the last day of the financial year:

Pre-adjustment trial balance

ACCOUNT	Fol	Debit R	Credit R
Balance sheet accounts section
Debtors control	B9	130 000

Adjustments at 31 December 20.1:

Jack Traders wants to create an allowance for credit losses of R6 500.

General Ledger of Jack Traders
Debtors control
Fol
Date
Details
Amount
Date
Details
Fol
Amount
Allowance for credit losses (a negative asset)
Details
Date
Details
Fol
Amount
Date
Fol
Amount
Allowance for credit losses adjustment (an expense account)
Fol
Date
Details
Amount
Date
Details
Fol
Amount
Profit and loss account
Date
Details
Fol
Amount
Date
Details
Fol
Amount

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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