Rules & calculation for receivable allowance

*john Stamp has opening balances at 1 January 2016 on his trade receivables account and allowance for receivables account of $68,000 and $3,400 respectively. During the year to 31 December 2016 John Stamp makes credit sales of $354,000 and receives cash from his receivables of $340,000.

At 31 December 2016 John Stamp reviews his receivables listing and acknowledges that he is unlikely ever to receive debts totaling $2,000. These are to be written off as irrecoverable. Past experience indicates that John should also make an allowance equivalent to 5% of his remaining receivables after writing off the irrecoverable debts.

Rules 1.calculate receivable balances  for financial statement

Receivable balances  $(354-340)+68=                      82000

-bad debt                                                                           (2000)

                                                                                            80000
-closing allowance 80000*05/100                              (4000) 

receivable balance for balance sheet                          76000      

                                                                                       

Reminder that if question indicated that bad debt  wrote off/already written up then bad debt must not be deducted from receivable balance  and directly calculate allowance on receivable balance 

Receivable balances  $(354-340)+68=                      82000

-bad debt                                                                             nil

                                                                                            
-closing allowance 82000*05/100                            (4100) 

receivable balance for balance sheet                          77900    

Rules 2. adjustment for bad-debt in the income statement

bad debt balance                2000

+closing allowance            4000

-opening allowance          (3400)
adjustment of bad debt    2600 debit to the income statement

note:some times bad debt amount may be the opposite/negative balance 

for example,assuming that

bad debt balance                2000

+closing allowance            3000

-opening allowance          (6400)
adjustment of bad debt    (1400) credited  to the income statement

Rules 3.increase / decrease allowance receivable

1.if opening allowance is greater than closing allowance then the amount will be credited to the income statement.  op 4000- 3000 clo=(1000) credited  to the income statement

2.if opening allowance is less than closing allowance then the amount will be debited  to the income statement. op 3400-4000 clo =600 debited  to the income statement.