IMPORTANT

[sexybeast302]

stuck on a question
you have to post some transactions into the general journal and i am not quite sure how to treat this one:

Debtor- Smith has advised Michael that he intends to only pay 20 cents in the dollar of the total owed to the business. As at 21 Jan 2012, he owed $3600. At present no amount has yet been received. (memo 6)

The amount owing is 1200

and the question after that is explain your treatment of memo 6 even though no payment has yet been received

Any help would be greatly appreciated!!

[Somye]

I'm a little confused here, is the amount owing 1200 or 3600?

assuming it's 3600, you lose 80, so .80*3600 = 2880 written off as bad debts

You would record the bad debt outlined in memo 6 because to not do so would breach the principle of conservatism, as your assets are overstated and expenses understated.

[sexybeast302]

my bad the amount was 3600! thanks heaps

[sexybeast302]

sorry to be annoying but how would you answer this question:
'Using a system of control accounts and subsidiary ledgers is vital in ensuring that all relevant information is available' Discuss

[sam.utute]

Subsidiary ledgers and control accounts provide 3 benefits.
In this case, because the question asks you about relevance, you should discuss the fact that only totals are reported in the balance sheet, making it easier to understand etc.
No need to discuss the double checking mechanism (if the question was reliability, then you would).