How to draw up a financial statement with the adjustment of impairment loss on Trade receivable?

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 Now we have learnt that Trade receivable, customers buy inventory on credit, may not be able to pay the business, we will need to learn how to calculate and estimate this impairment loss. 

In this section, I will illustrate a financial statement with such adjustment.  

Question

Step 1  One  of the trade receivable go bankrupt, then the double entry for this transaction will be 

Dr Allowance for impairment $550  and Cr Trade receivable $550

So, we will need to minus from allowance this amount $550 and also minus from Trade receivable $550

Step 2  The review stated that the new allowance for impairment is now $700, so this amount will be the balance amount and will appear in the statement of financial position.  In the statement of financial performance, we will need to calculate the impairment loss on trade receivable,

ie . $800 - $ 550 = $250 after step 1

     $700 - $250 = $450 -- impairment loss on trade receivable

or in ledger account, it will look like this 


Final answer for the above question :




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