I have a question about loan impairments, hope somebody can assist.
Lets say in financial year 2010 you have a loan account
8900/001 New Business Venture R 1 000 0000
During the audit for this financial year the auditors instruct you to impair the loan account because they feel it will not be repaid for R 900 000. They instruct you to use 8900/002.
Why does the impairment entry not go into the loan account directly?
What do both accounts opening balance look like in the new financial year i.e when you roll over to 2011?
Do you now carry these forward every year when you roll over i.e the above would also be your opening balance in 2012?
Thanks for the assistance in advance, need to get my head wrapped around this!