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Camel Ltd traditionally estimated its allowance for doubtful debts as a percentage of net credit...

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Accounting

Camel Ltd traditionally estimated its allowance for doubtful debts as a percentage of net credit sales for the year. An analysis of the variance between the allowance amount and the actual bad debts written off for the past 5 years has shown significant unfavourable discrepancies. In the previous year (ended 30 June 2022) the allowance was estimated at $24000, but bad debts written off during the current year were $11200 more than allowed for. Consequently, the accountant has decided to change the method of estimation from a percentage of net credit sales to an analysis of the accounts receivable balances. This analysis estimated that the allowance for doubtful debts should be $35600 as at 30 June 2023(the current year).
Required
1. Show the following for the year ended 30 June 2023:
(a) the ledger account for the allowance for doubtful debts
(b) the end of the reporting period adjusting journal entry.
2. Justify your accounting treatment in requirement 1 with reference to the requirements of AASB 108/IAS 8.
3. Explain how and why the change in method of estimation should be disclosed by Camel Ltd.

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