Audit of adlofo corporation for calendar year 2019

audit of Adlofo Corporation for calendar year 2019. You are now working on the audit of the accounts
receivable and related allowance for doubtful accounts.
ACCOUNTS RECEIVABLE – TRADE
Reconciliation between General Ledger Balance and
The total of Subsidiary Ledger Balances

December 31, 2019
Total of subsidiary ledger balances P 5,635700
Undelivered sales based on sales orders received up
to December 31, 2019 per journal voucher No. 1962 2,732,900*
Goods consigned to Robinsons Appliance Center and others 3,260,700**
Collections received from Cebu and Davao branches
on January 2 based on official receipts dated December
31, 2019 for sales made on December 16, 2019 ( 1,092,800) ***
Balance per general ledger P10,536,500
*Goods are physically segregated during inventory count. Sales invoices for these were issued on January
2 and deliveries to customers were made on January 3, 2006.
**These goods were physically verified in customers’ stores. Under the terms of consignment, goods are
billed to customers, based upon their sales report.
***Subsequently deposited on January 3, 2006.
Customers are billed at 20% above cost. Term 30 days.
ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLES
Analysis of Movement during the Year
December 31, 2019
Allowance, December 31, 2018 P 1,020,000
Movement during the year
Provisions 3,425,625
Write-offs ( 4,164,370)
Allowance, December 31, 2019 P 281,255
1. Aging of accounts receivable – trade based on accounts receivable schedule as of December 31,
2019, before considering any adjustments on the accounts:
Per Client Per Audit
Current P4,469,760 P4067,320
31-60 days 267,320 402,440
61-90 days 455,440 267,320
91 days and over 443,180 898,620
P5,635,700 P5,635,700
2. A review of collectivity of each account disclosed the following:
a. A customer with an account balance of P568,000 classified as current in aging can no longer be
located by company lawyers. The customer’s check in payment of this account was returned by
the bank on May 15, 2019. He has no known assets and his liabilities to other creditors totaled to
P7,000,000. The other creditors have the same experience as the company.
b. The lawyers informed us that the debtors with account balances totaling P790,450 (classified as
91 days and over in the client’s aging) were already found worthless.

d. The balance of allowance for doubtful accounts should be adequate to cover possible losses the
company may incur in cases of non-collection: that is the account balance at the end of the year
should be:
1. Total amount arrived at as doubtful by applying the percentage of possible losses to the total
of the account age classification or
2. Total amount arrived at as doubtful based upon the results of the review of collectibility of
each account: whichever is the higher of (1) and (2) above.