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O-Level Trade receivables

What the O-Level syllabus expects for Trade receivables, and how to practise it.

What the syllabus expects

• Weigh both accounting and non-accounting information to judge the creditworthiness of current and prospective customers
  Scope: Non-accounting factors limited to economic outlook, specific industry outlook, reputation of customer and repayment history
• Explain how impairment loss on trade receivables is accounted for using the relevant accounting theories
  Scope: Relevant theories: matching and prudence
• Define trade discount
• Explain the reason a trade discount is granted
• Define cash discount
• Explain the reason a cash discount is granted
• Tell apart trade discounts and cash discounts
• Compute the trade discount when goods are sold and when they are returned
• Compute cash discount
• Write the journal entries for transactions that move trade receivables
  Scope: Covers both trading and service businesses
• Write the journal entries for the allowance for impairment of trade receivables
• Draw up a trade receivables ledger account
• Read the ledger accounts covering trade receivables, impairment loss on trade receivables, and the allowance for impairment of trade receivables
  Scope: FRS 109 general provision approach; preparing the allowance and impairment-loss ledger accounts is not required
• Work out how a cash discount affects the period's profit and trade receivables
• Work out how movements in impairment loss on trade receivables and in the allowance for impairment of trade receivables affect trade receivables and the period's profit or loss
  Scope: Scenarios: first-time allowance, an increase, or a decrease over the prior year
• Name how trade receivables are valued in the Statement of Financial Position
• Produce, from both the Statement of Financial Position and the Statement of Financial Performance, extracts laying out impairment loss on trade receivables, the allowance for impairment of trade receivables, discount allowed and trade receivables

More O-Level Principles of Accounts topics

Roles of accounting and of accountants · Stakeholders and what they need in order to decide · Judging profitability · Judging liquidity · Judging efficiency of inventory and trade receivables management · Kinds of business · all of O-Level Principles of Accounts