Answer to Question #134772 in Accounting for Benazir Haufiku

Question

A debtor with an outstanding balance of N$71 500 on 31 December 2018, was declared insolvent and placed under liquidation on 20 January 2019. The liquidator indicated that creditors will receive 30 cents in the rand. No allowance for credit losses was made at reporting date. Is this an adjusting event or non-adjusting event?

Answer 1

Events occurring after the reporting period are of two types:

1|• Adjusting events, for which conditions existed on the balance sheet date and requires to be adjusted in the financial statements.

2|• Non adjusting events, for which conditions arose after the balance sheet date and requires no adjustments to the financial statements.

In the given situation, the conditions for insolvency of the debtor arose after the balance sheet dated December 31, 2018 and the entity became aware of this on 20^th January 2019, which falls in the next reporting period.

Thus it is non-adjusting event.