The treasurer of a community library records its dealings with member schools, all of which are invoiced for their annual fee. Complete the table to identif...

Three separate accounts are in play and keeping them apart is what this question tests. Irrecoverable debts is an expense for balances known to be lost. Allowance for irrecoverable debts is a running estimate held against receivables in general. Irrecoverable debts recovered is income arising when a debt already written off is paid after all.

Why each line takes that form:

1. Writing off removes the asset, so trade receivables is credited, and recognises the loss, so the irrecoverable debts expense is debited. No cash entry is made because no money has moved.
2. Creating the allowance charges the estimated loss to the income statement and builds up a credit balance which is later deducted from trade receivables. The receivables account itself is untouched, because no individual school has been identified.
3. Increasing the allowance repeats that entry for the increase only. Charging the whole new allowance would count the earlier part twice.
4. Reducing the allowance releases part of a charge made in an earlier year, so the allowance account is debited and the income statement credited, which raises profit.
5. The recovery brings money in, so bank is debited. The credit cannot go to trade receivables, because that balance was cleared when the fee was written off; it goes to irrecoverable debts recovered as income of the current year.

For the allowance, only the movement is posted to the income statement, and the direction of that movement decides which side of the allowance account is used.

Total .