Receivables are the amounts customers owe the business for goods sold on credit. This module teaches how to record the debts that will never be paid, how to estimate those that might not be, and how to show the result on a statement.
It sits within the wider IGCSE Accounting subject guide and follows accruals and prepayments in the year-end adjustments. Check the current Cambridge syllabus for the exact wording and scope in your exam year.
Why does this topic matter?
A business records a credit sale as income and as an asset on the same day. If the customer later cannot pay, the asset is overstated and profit is too high. Adjusting for this gives a more honest picture, which is the idea of prudence.
Questions on this topic usually combine a write-off, an allowance calculation and a statement extract. Each step is small, but the order matters.
What should you know first?
You should be comfortable with basic double entry, with the idea that each entry has one debit and one credit of equal value, and with percentages. If you can find 5% of RM18,600 with a calculator, you are ready.
An orienting example
A shop’s customer owes RM500 and cannot pay. The shop’s receivables total is RM10,000 and its policy is an allowance of 5% of remaining receivables, with no allowance before.
- Write off the debt: debit Irrecoverable debts RM500, credit the customer RM500.
- Remaining receivables: RM10,000 − RM500 = RM9,500.
- Allowance: 5% of RM9,500 = RM475. Debit Irrecoverable debts RM475, credit Allowance RM475.
- Total expense: RM500 + RM475 = RM975.
- Net receivables: RM9,500 − RM475 = RM9,025.
Check: 9,500 × 5 ÷ 100 = 475, and 9,500 − 475 = 9,025.
What order should you study the lessons in?
- Record an irrecoverable amount: the two-sided entry for a debt that will not be paid.
- Calculate an allowance from supplied policy: choose the base, apply the percentage and record only the change.
- Distinguish an allowance adjustment from a write-off: put both in one question without mixing them.
- Show a net receivables figure: present the result in current assets.
- Explain why collectability affects an estimate: give a reason, not only a figure, including ageing.
What traps catch students?
The common traps are small and avoidable. Know them before you start.
- Taking the percentage of receivables before the write-off is removed.
- Recording the whole new allowance, not the change from last year.
- Writing off a debt against the allowance instead of the customer’s account.
- Deducting the allowance twice when totalling current assets.
- Describing the allowance as cash set aside.
How should you use the practice set?
Finish the lessons first, then attempt the mixed practice set on paper without peeking. Mark your work against the worked answers and note each error in the mistake log or the double-entry trainer.
The percentage-base explorer helps when you are unsure which balance the percentage applies to. Repeat any question that went wrong a few days later, so that the correction stays.
If your own examples keep getting stuck at the same step, our teachers can work through them in online one-to-one Accounting tuition.