MCQ - Bad & Doubtful Debts

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Email *

Record my email address with my response

M. ALIYAN SHAHID *

Which statement is true? *

1 point

Bad debts are deducted from trade receivables after the provision for doubtful debts is calculated.

Bad debts are deducted from trade receivables before the provision for doubtful debts is calculated.

Bad debts are only written off if there is no provision for doubtful debts.

Provision is only made for doubtful debts if no bad debts have been written off in the year.

A business maintains a provision for doubtful debts of 5% of trade receivables. The balance on the provision for doubtful debts account on 31 December 2018 was $2700. On 31 December 2019 the trade receivables amounted to $50 000.

How will the provision for doubtful debts be recorded on 31 December 2019?

1 point

A book-keeper made the following ledger entry.

Which transaction has been recorded?

1 point

A credit customer has paid his account by the due date.

A late payment has been received for a debt not yet written off.

A payment has been received for a debt that had been written off.

An irrecoverable debt has been written off.

Which change would cause an increase in the liquid (acid test) ratio? *

1 point

a decrease in inventory

an increase in inventory

a decrease in the provision for doubtful debts

an increase in the provision for doubtful debts

Why does a business maintain a provision for doubtful debts account? *

1 point

to apply the accounting principle of prudence

to avoid profit for the year being understated

to have an accurate forecast of debts which will be uncollectible

to reduce the expense of irrecoverable debts in the future

Joseph sells goods on credit and maintains a provision for doubtful debts. He wants to increase his provision for doubtful debts by $250.

Which journal entry records an increase in the provision for doubtful debts?

1 point

Which items are deducted from the gross profit when calculating the profit for the year?

1 balance on the provision for doubtful debts account

2 carriage paid on goods supplied to customers

3 drawings made by the owner during the year

4 wages paid to employees during the year

1 point

1, 2 and 3

1 and 4

2 and 3 only

2 and 4

Shilpa’s financial year ends on 30 April. On 31 March 2021 she wrote off a debt owed by Tahir as irrecoverable.

Which entry did Shilpa make on 31 March 2021? *

1 point