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Qualifications · Bookkeeping Grade 3 (Nissho Boki) Lab

Accounts Receivable and Payable, and Electronically Recorded Receivables and Payables

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Q1 | Creation of an electronically recorded receivable (creditor)

[Journal entry] For an account receivable of ¥250,000 from a customer, Fukuoka Shoten, we obtained the customer's consent and had a creation record of an electronically recorded receivable made through our bank. Which journal entry is correct?

  1. Dr Checking account (当座預金) 250,000 / Cr Accounts receivable (売掛金) 250,000
  2. Dr Accounts receivable (売掛金) 250,000 / Cr Electronically recorded receivables (電子記録債権) 250,000
  3. Dr Electronically recorded receivables (電子記録債権) 250,000 / Cr Accounts receivable (売掛金) 250,000
  4. Dr Electronically recorded receivables (電子記録債権) 250,000 / Cr Sales (売上) 250,000
AnswerC. Dr Electronically recorded receivables (電子記録債権) 250,000 / Cr Accounts receivable (売掛金) 250,000

The creation record turns the account receivable into an electronically recorded receivable. Debit the asset Electronically recorded receivables and credit the asset Accounts receivable. Increasing the checking account is wrong because no money has been received yet. The entry with the two accounts swapped has debit and credit reversed. Crediting Sales is wrong because the sale was already recorded when the goods were sold on credit, so sales would be counted twice.

Q2 | Creation of an electronically recorded payable (debtor)

[Journal entry] To pay an account payable of ¥180,000 to a supplier, Yokohama Shoten, we had a creation record of an electronically recorded payable made through our bank. Which journal entry is correct?

  1. Dr Accounts payable (買掛金) 180,000 / Cr Electronically recorded payables (電子記録債務) 180,000
  2. Dr Electronically recorded payables (電子記録債務) 180,000 / Cr Accounts payable (買掛金) 180,000
  3. Dr Purchases (仕入) 180,000 / Cr Electronically recorded payables (電子記録債務) 180,000
  4. Dr Accounts payable (買掛金) 180,000 / Cr Checking account (当座預金) 180,000
AnswerA. Dr Accounts payable (買掛金) 180,000 / Cr Electronically recorded payables (電子記録債務) 180,000

The obligation changes from an account payable to an electronically recorded payable, so debit the liability Accounts payable and credit the liability Electronically recorded payables. Debiting Electronically recorded payables reverses debit and credit. Debiting Purchases double-counts purchases that were already recorded. Crediting the checking account is wrong because the due date has not come and no money has been paid yet.

Q3 | Settlement of an electronically recorded payable

[Journal entry] The due date arrived for an electronically recorded payable of ¥180,000 recorded last month, and it was paid from our checking account. Which journal entry is correct?

  1. Dr Accounts payable (買掛金) 180,000 / Cr Checking account (当座預金) 180,000
  2. Dr Checking account (当座預金) 180,000 / Cr Electronically recorded payables (電子記録債務) 180,000
  3. Dr Electronically recorded receivables (電子記録債権) 180,000 / Cr Checking account (当座預金) 180,000
  4. Dr Electronically recorded payables (電子記録債務) 180,000 / Cr Checking account (当座預金) 180,000
AnswerD. Dr Electronically recorded payables (電子記録債務) 180,000 / Cr Checking account (当座預金) 180,000

Settlement removes the payable, so debit the liability Electronically recorded payables and credit the asset Checking account. Accounts payable was already reduced at the creation record, so debiting it again is wrong. Debiting the checking account reverses debit and credit. Electronically recorded receivables is the receiving side's asset account, so it is wrong for us as the payer.

Q4 | Bad debt on a receivable from the current period

[Journal entry] An account receivable of ¥40,000 that arose from a sale in the current period became uncollectible because the customer went bankrupt. The allowance for doubtful accounts has a balance of ¥30,000. Which journal entry is correct?

  1. Dr Allowance for doubtful accounts (貸倒引当金) 30,000, Bad debt loss (貸倒損失) 10,000 / Cr Accounts receivable (売掛金) 40,000
  2. Dr Bad debt loss (貸倒損失) 40,000 / Cr Accounts receivable (売掛金) 40,000
  3. Dr Allowance for doubtful accounts (貸倒引当金) 40,000 / Cr Accounts receivable (売掛金) 40,000
  4. Dr Provision for doubtful accounts (貸倒引当金繰入) 40,000 / Cr Accounts receivable (売掛金) 40,000
AnswerB. Dr Bad debt loss (貸倒損失) 40,000 / Cr Accounts receivable (売掛金) 40,000

A receivable that arose in the current period was not covered by the allowance set at the end of the previous period, so the full amount is a bad debt loss (expense). Using ¥30,000 of the allowance and expensing the rest is the treatment for receivables from earlier periods. Using ¥40,000 of the allowance gets the timing wrong and also exceeds the balance. Provision for doubtful accounts is used when setting the allowance at year-end, not when a bad debt occurs.

Q5 | Bad debt on a receivable from a prior period

[Journal entry] An account receivable of ¥90,000 that arose from a sale in the previous period became uncollectible because the customer went bankrupt. The allowance for doubtful accounts has a balance of ¥60,000. Which journal entry is correct?

  1. Dr Bad debt loss (貸倒損失) 90,000 / Cr Accounts receivable (売掛金) 90,000
  2. Dr Allowance for doubtful accounts (貸倒引当金) 90,000 / Cr Accounts receivable (売掛金) 90,000
  3. Dr Allowance for doubtful accounts (貸倒引当金) 60,000, Provision for doubtful accounts (貸倒引当金繰入) 30,000 / Cr Accounts receivable (売掛金) 90,000
  4. Dr Allowance for doubtful accounts (貸倒引当金) 60,000, Bad debt loss (貸倒損失) 30,000 / Cr Accounts receivable (売掛金) 90,000
AnswerD. Dr Allowance for doubtful accounts (貸倒引当金) 60,000, Bad debt loss (貸倒損失) 30,000 / Cr Accounts receivable (売掛金) 90,000

Receivables from the previous period were covered by the allowance set at the end of that period, so first use the ¥60,000 allowance and expense the remaining ¥30,000 as a bad debt loss. Expensing the full amount ignores the allowance. Using ¥90,000 of the allowance exceeds its ¥60,000 balance. Recording the shortfall as a provision is wrong because the provision account is used only when setting the allowance at year-end.

Q6 | Recovery of a bad debt written off

[Journal entry] Of an account receivable of ¥50,000 that was written off as a bad debt in the previous period, ¥20,000 was recovered in cash. Which journal entry is correct?

  1. Dr Cash (現金) 20,000 / Cr Recovery of bad debts written off (償却債権取立益) 20,000
  2. Dr Cash (現金) 20,000 / Cr Accounts receivable (売掛金) 20,000
  3. Dr Cash (現金) 20,000 / Cr Allowance for doubtful accounts (貸倒引当金) 20,000
  4. Dr Cash (現金) 20,000 / Cr Reversal of allowance for doubtful accounts (貸倒引当金戻入) 20,000
AnswerA. Dr Cash (現金) 20,000 / Cr Recovery of bad debts written off (償却債権取立益) 20,000

The receivable written off in the previous period is no longer on the books, so the amount recovered is recorded as Recovery of bad debts written off (revenue). Crediting Accounts receivable would reduce a receivable that no longer exists. Crediting the allowance confuses a recovery with a provision for the future. Reversal of allowance is used at year-end when the estimate is smaller than the allowance balance.

Q7 | Setting the allowance (difference-supplement method)

[Journal entry] At year-end, an allowance for doubtful accounts of 2% is set on the ending balances of accounts receivable (¥600,000) and electronically recorded receivables (¥400,000) using the difference-supplement method (差額補充法). The allowance has a balance of ¥8,000. Which journal entry is correct?

  1. Dr Provision for doubtful accounts (貸倒引当金繰入) 20,000 / Cr Allowance for doubtful accounts (貸倒引当金) 20,000
  2. Dr Allowance for doubtful accounts (貸倒引当金) 12,000 / Cr Provision for doubtful accounts (貸倒引当金繰入) 12,000
  3. Dr Provision for doubtful accounts (貸倒引当金繰入) 12,000 / Cr Allowance for doubtful accounts (貸倒引当金) 12,000
  4. Dr Provision for doubtful accounts (貸倒引当金繰入) 4,000 / Cr Allowance for doubtful accounts (貸倒引当金) 4,000
AnswerC. Dr Provision for doubtful accounts (貸倒引当金繰入) 12,000 / Cr Allowance for doubtful accounts (貸倒引当金) 12,000

The estimate is (600,000 + 400,000) × 2% = ¥20,000. Provide the difference from the ¥8,000 balance, ¥12,000. Providing ¥20,000 ignores the existing balance. Debiting the allowance reverses debit and credit. ¥4,000 comes from estimating on accounts receivable only (600,000 × 2% = 12,000); electronically recorded receivables are also covered.

Q8 | Calculating a reversal

[Calculation] At year-end, a 2% allowance for doubtful accounts is set on the ending balances of accounts receivable (¥450,000) and electronically recorded receivables (¥150,000) using the difference-supplement method. The allowance has a balance of ¥15,000. Which account and amount are recorded in the year-end adjustment?

  1. Provision for doubtful accounts (貸倒引当金繰入) ¥3,000
  2. Reversal of allowance for doubtful accounts (貸倒引当金戻入) ¥3,000
  3. Reversal of allowance for doubtful accounts (貸倒引当金戻入) ¥6,000
  4. Provision for doubtful accounts (貸倒引当金繰入) ¥12,000
AnswerB. Reversal of allowance for doubtful accounts (貸倒引当金戻入) ¥3,000

The estimate is (450,000 + 150,000) × 2% = ¥12,000. The balance of ¥15,000 is ¥3,000 too large, so record Dr Allowance 3,000 / Cr Reversal of allowance 3,000, a revenue of ¥3,000. A provision of ¥3,000 adds to an allowance that is already too large. A reversal of ¥6,000 comes from estimating on accounts receivable only (450,000 × 2% = 9,000). A provision of ¥12,000 ignores the existing balance.

Q9 | Write-off during the year and year-end provision

[Calculation] The allowance for doubtful accounts had an opening balance of ¥25,000. During the year, an account receivable of ¥18,000 from the previous period went bad and was charged against the allowance. At year-end, a 3% allowance is set on accounts receivable of ¥700,000 and electronically recorded receivables of ¥300,000 using the difference-supplement method. What is the provision for doubtful accounts?

  1. ¥5,000
  2. ¥14,000
  3. ¥30,000
  4. ¥23,000
AnswerD. ¥23,000

After the write-off, the balance before adjustment is 25,000 − 18,000 = ¥7,000. The estimate is (700,000 + 300,000) × 3% = ¥30,000, so the provision is 30,000 − 7,000 = ¥23,000. ¥5,000 forgets the write-off and subtracts the opening ¥25,000. ¥14,000 estimates on accounts receivable only (700,000 × 3% = 21,000). ¥30,000 ignores the existing balance.

Q10 | Subsidiary ledger and the control account

[Calculation] The company has only two customers, Tokyo Shoten and Osaka Shoten. This month's receivable transactions were: Tokyo Shoten: brought forward ¥120,000, credit sales ¥300,000, returns of wrong goods ¥10,000, collected by ordinary deposit ¥250,000. Osaka Shoten: brought forward ¥80,000, credit sales ¥200,000, creation record of an electronically recorded receivable with its consent ¥150,000, collected by ordinary deposit ¥60,000. What is the month-end balance of the Accounts receivable account?

  1. ¥230,000
  2. ¥240,000
  3. ¥380,000
  4. ¥390,000
AnswerA. ¥230,000

Tokyo Shoten: 120,000 + 300,000 − 10,000 − 250,000 = ¥160,000. Osaka Shoten: 80,000 + 200,000 − 150,000 − 60,000 = ¥70,000. The control account balance is the total, ¥230,000. ¥240,000 forgets that returns reduce receivables. ¥380,000 forgets that the creation record turns ¥150,000 of receivables into electronically recorded receivables. ¥390,000 forgets both.

Q11 | The role of the accounts receivable ledger

[Reading] Which statement about the accounts receivable ledger (customer ledger, 得意先元帳) is correct?

  1. It is part of the general ledger and is used instead of the Accounts receivable account
  2. The total of the balances of the customer accounts equals the balance of the Accounts receivable account
  3. Only transactions that increase receivables are entered; decreases are not entered
  4. Each customer account balance shows the total cash received from that customer
AnswerB. The total of the balances of the customer accounts equals the balance of the Accounts receivable account

The same transactions are entered both in the Accounts receivable account and, customer by customer, in the subsidiary ledger, so the total of the customer balances equals the control account balance. The ledger is a subsidiary ledger that supports the general ledger, not a replacement for the Accounts receivable account. Decreases such as collections and returns are also entered on the credit side. A customer's balance is the amount still uncollected, not the total cash received.

Q12 | Reading the allowance account

[Reading] A company's Allowance for doubtful accounts for the current year shows: Debit: 9/10 Accounts receivable ¥14,000; 3/31 Balance carried forward ¥26,000. Credit: 4/1 Balance brought forward ¥20,000; 3/31 Provision for doubtful accounts (amount blank). Which reading of this account is correct?

  1. 9/10 records a bad debt on a current-period receivable, and the provision is ¥6,000
  2. 9/10 records setting up a new allowance, and the provision is ¥26,000
  3. 9/10 records charging a bad debt on a prior-period receivable to the allowance, and the provision is ¥20,000
  4. 9/10 records recovering a receivable already written off, and the provision is ¥40,000
AnswerC. 9/10 records charging a bad debt on a prior-period receivable to the allowance, and the provision is ¥20,000

The debit "Accounts receivable ¥14,000" records a prior-period receivable going bad and being charged to the allowance. The balance before adjustment is 20,000 − 14,000 = ¥6,000, and the ending balance carried forward is ¥26,000, so the provision is 26,000 − 6,000 = ¥20,000. A bad debt on a current-period receivable is recorded as a bad debt loss, not in the allowance (¥6,000 ignores the write-off). Setting the allowance is entered on the credit side, so the 9/10 debit is not a set-up (¥26,000 is just the ending balance). A recovery of a written-off receivable is recorded as Recovery of bad debts written off, not in the allowance (¥40,000 adds the write-off instead of subtracting it).

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