OxfordAQA IGCSE Accounting: Irrecoverable debts, provisions and inventory (9215) – Revision Notes

These notes condense part of section 3.3 of the OxfordAQA International GCSE Accounting (9215) specification, version 1.2, for exams from May/June 2026 onwards: irrecoverable debts, provisions for doubtful debts, and opening and closing inventory at cost or net realisable value. For full explanations and worked ledgers, read the study guide. Test yourself with the practice questions, check progress with the free diagnostics, and tick off topics on the printable checklist. The course hub lists the rest of the course. Amounts are in dollars.

Key terms

Term	Meaning
Trade receivable	A customer who owes the business for goods bought on credit
Irrecoverable debt	A trade receivable’s balance the business does not expect to collect, so it is written off
Provision for doubtful debts	An estimate of the loss on the receivables that remain, held as a credit balance
Inventory	Goods held for resale
Net realisable value	Expected selling price less costs of repair or completion and selling costs
Cost of sales	Opening inventory + purchases - closing inventory

Not examined

• The recovery of irrecoverable debts (the specification says so).
• FIFO, AVCO and LIFO inventory valuation (stated in section 3.4).

Entries at a glance

Event	Debit	Credit	Statement effect
Debt written off	Irrecoverable debts	Customer’s account (trade receivables ledger)	Expense in income statement; receivables fall
Year end: clear irrecoverable debts	Income statement	Irrecoverable debts	Closes the account
Provision created or increased	Income statement	Provision for doubtful debts	Expense; provision deducted from receivables
Provision decreased	Provision for doubtful debts	Income statement	Profit rises (reduction in expenses or other income)
Opening inventory	Income statement	Inventory	Added to purchases in cost of sales
Closing inventory	Inventory	Income statement	Deducted in cost of sales; asset in the statement of financial position

Method: irrecoverable debts

1. Credit the customer’s account with the balance written off.
2. Debit the irrecoverable debts account.
3. At the year end, transfer the total to the income statement.
4. Show only the remaining trade receivables in the statement of financial position.

Reminder: a hire club owes 330 and is declared insolvent. Debit irrecoverable debts 330, credit the club’s account 330. Trade receivables fall by 330 and profit falls by 330.

Method: provision for doubtful debts

1. Write off any irrecoverable debts first.
2. Take the percentage of the remaining trade receivables. This is the new provision.
3. Compare with the existing provision. Only the difference goes to the income statement.
4. Deduct the new provision from trade receivables in the statement of financial position.

Case	Receivables	Rate	New provision	Old provision	Action
Increase	12,500	4%	500	380	Charge 120 as an expense
Decrease	13,000	3%	390	520	Credit 130 to income statement; profit rises

Presentation in the statement of financial position: trade receivables 12,500, less provision (500), giving 12,000.

Method: inventory

1. Find opening inventory (last year’s closing figure).
2. Value closing inventory line by line at the lower of cost and net realisable value.
3. Calculate cost of sales: opening inventory + purchases - closing inventory.
4. Show closing inventory as a current asset.

Net realisable value reminder: a line of 28 units cost 40 each. Each can be sold for 36, but 6 of selling costs falls on each. Net realisable value is 30 each, or 840 for the line, against cost of 1,120. Value the line at 840. The 280 difference is a reduction in profit this year.

Ledger shape of the inventory account:

Debit	Credit
Balance b/d (opening)	Income statement (opening moved out)
Income statement (closing moved in)	Balance c/d (closing)

Must-know distinctions

Compare	Point
Irrecoverable debt vs provision	The debt is certain and tied to a named customer; the provision is an estimate on the remaining receivables
Write-off vs provision in the ledger	A write-off credits a customer; a provision credits the provision account
Increase vs decrease in provision	Increase is an expense; decrease raises profit
Cost vs net realisable value	Use whichever is lower for each line
Opening vs closing inventory	Opening is added to purchases; closing is deducted
Inventory error: this year vs next	The same error changes profit in opposite directions in consecutive years

Concepts in these adjustments

• Prudence: do not overstate assets or profit. Supports the provision and lower-of-cost-and-net-realisable-value.
• Accruals: match losses to the period of the sales.
• Historic cost: start from what the goods cost.
• Consistency: apply the same percentage and valuation basis each year.
• Going concern: assume the business keeps trading when valuing inventory.

Worked reminder: all three adjustments together

Revenue 52,000; opening inventory 3,100; purchases 30,400; closing inventory 3,600; running expenses 9,800; irrecoverable debts 260 already written off; trade receivables 6,000; existing provision 220; new provision 5%.

Step	Working	Result
Cost of sales	3,100 + 30,400 - 3,600	29,900
Gross profit	52,000 - 29,900	22,100
New provision	6,000 x 5%	300
Increase in provision	300 - 220	80
Total expenses	9,800 + 260 + 80	10,140
Net profit	22,100 - 10,140	11,960

In the statement of financial position, current assets show inventory 3,600 and trade receivables 6,000 less provision (300), giving 5,700.

What an inventory error does

Error	Cost of sales	Gross and net profit	Following year
Closing inventory too high	Too low	Too high	Opening inventory too high, so profit too low
Closing inventory too low	Too high	Too low	Opening inventory too low, so profit too high

The statement of financial position is also wrong at the year end by the same amount, because inventory is a current asset.

Command words

• State or name: give the point without development.
• Calculate: show the working, because the method can earn credit even if the answer is wrong.
• Prepare or complete: lay out the account or statement with headings, dates and totals.
• Explain: give a reason and link it to the business in the question. For a concept, name it and apply it.

A routine for adjustment questions

1. Read the whole question and list each adjustment before you calculate anything.
2. Deal with irrecoverable debts first, because they change the trade receivables total used for the provision.
3. Work out the provision and its increase or decrease.
4. Value closing inventory line by line, then calculate cost of sales.
5. Place each figure in the income statement and the statement of financial position, and say where it goes in both.
6. Check that gross profit, total expenses and net profit add up before you move on.

Quick self-test

1. State what is meant by an irrecoverable debt.
2. Which account is credited when a customer’s debt is written off?
3. Where does the balance on the irrecoverable debts account go at the year end?
4. Trade receivables are 8,400 after write-offs. The provision is 5% and the existing provision is 300. What is charged to the income statement?
5. The provision falls from 560 to 480. What is the effect on net profit?
6. In the statement of financial position, from which item is the provision deducted?
7. An item cost 47. It will sell for 52 with selling costs of 9. At what value should it be included in inventory?
8. Opening inventory is 5,000, purchases 31,000 and closing inventory 6,200. Calculate cost of sales.
9. Closing inventory is overstated by 400. What is the effect on net profit for the year?
10. Name the concept that explains why inventory is not carried above net realisable value.

Answers

1. A balance owed by a trade receivable that the business does not expect to collect, so it is written off as an expense.
2. The customer’s account in the trade receivables ledger, with irrecoverable debts debited.
3. It is transferred to the income statement as an expense.
4. New provision 420 (8,400 x 5%), less 300 existing: an expense of 120.
5. Net profit rises by 80.
6. Trade receivables.
7. 43 (52 - 9), because it is lower than the cost of 47.
8. 29,800 (36,000 - 6,200).
9. Net profit is overstated by 400.
10. Prudence.

Where marks are usually lost

• Debiting the customer when writing off a debt instead of crediting.
• Applying the percentage before removing the irrecoverable debts.
• Charging the full provision instead of the increase or decrease.
• Describing a decrease in the provision as a cost.
• Valuing inventory at net realisable value when it is higher than cost.
• Putting closing inventory in the expenses instead of deducting it in cost of sales.
• Leaving the provision out of the statement of financial position, or deducting it from the wrong item.
• Giving an explanation without naming the concept or linking it to the situation in the question.
• Omitting headings, dates or totals on ledger accounts.

Frequently asked questions

What is an irrecoverable debt? A balance owed by a trade receivable that the business does not expect to collect, so it is written off: credit the customer’s account and debit the irrecoverable debts account.

What is the difference between an irrecoverable debt and a provision for doubtful debts? An irrecoverable debt is certain and tied to a named customer. A provision is an estimate on the remaining trade receivables, credited to the provision account rather than to a customer.

Is the recovery of irrecoverable debts examined in OxfordAQA International GCSE Accounting 9215? No. The specification says the recovery of irrecoverable debts is not examined, and FIFO, AVCO and LIFO inventory valuation methods are not examined either.

How is the provision for doubtful debts shown in the statement of financial position? The full provision is deducted from trade receivables, for example trade receivables 12,500 less provision 500. Only the increase or decrease goes to the income statement.

What does an inventory error do to profit? The same error changes profit in opposite directions in consecutive years, because this year’s closing inventory becomes next year’s opening inventory.

Official syllabus

OxfordAQA International GCSE Accounting (9215), specification version 1.2, for exams from May/June 2026 onwards, published by OxfordAQA. These notes cover part of section 3.3.