Given that the notes cover the entire topic, these should be used in a step-wise manner. It is important to first understand that trade receivables (TR) can end up as irrecoverable debts if the customer (TR) does not pay us because of bankruptcy or otherwise. The accounting treatment of irrecoverable debts is to remove the customer from the TR balance and transfer it to the SOPL as an expense.

Sometimes, irrecoverable debts can be later paid, and thus, this will make them irrecoverable debts recovered. In this case, we would need to treat these as an income in the SOPL.

Given that there is always the possibility that a share of TR is not received, following the Prudence and Accruals concept, we need to allow for doubtful debts. This can either be a specific or general allowance. Either way, the total charge goes to the SOFP whilst the change in allowance goes to the SOPL as either an expense (if it is increasing) or an income (if it is decreasing). This given that the allowance reflects increases or decreases in TR during the year.

You can watch the following Youtube videos about the Prudence and Accruals Concept:
– Prudence: https://www.youtube.com/watch?v=LJ2WlUU0r7U&t=6s
– Accruals: https://www.youtube.com/watch?v=e71V1rx4IIU&list=PL3cdk_SU0v30CeJsBoQpDWUvyzZrq-Vcu&index=4