The journal entries to account for the issues are as follows:
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For the uncollected funds of £92 that were initially recorded as received: Since the directors want to write off the debt as irrecoverable, the initial recognition of revenue should be reversed and an expense recognized. The entry would be: Debit Receivables £92, Credit Cash at bank £92 (to reverse the initial recognition) Debit Irrecoverable debts expense £92, Credit Receivables £92 (to recognize the loss)
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For the £475 allowance for receivables required at the year-end: This adjustment reflects the change in the estimate of uncollectible accounts. The entry would be: Debit Allowance for receivables £475, Credit Bad Debt Expense or Irrecoverable debts expense £475
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For the £58 payment received for a previously written-off amount: The suspense account needs to be cleared, and the payment should be applied against the previously written-off receivable. The entry would be: Debit Cash at bank £58, Credit Suspense account £58 Assuming the original write-off was correctly recorded, no further adjustment to the allowance for receivables or irrecoverable debts expense is needed.
Combining these entries, the total journal entry to account for all issues is:
Debit Receivables £92, Credit Cash at bank £92 Debit Allowance for receivables £475, Credit Bad Debt Expense or Irrecoverable debts expense £475 Debit Cash at bank £58, Credit Suspense account £58
This does not match any of the provided options. The correct sequence of journal entries to reflect all three issues is not shown in the choices.
