Chapter 13 Provision for doubtful debts

A decrease in the provision for doubtful debts would result in ______________.

• a reduction in net profit (profit for the year)

• an increase in net profit (profit for the year)

• a reduction in gross profit

• an increase in gross profit

Why do we need to substract the provision for doubtful debts over the trade receivables/ debtors balance in a statement of financial position/ balance sheet?

• because that is the formula

• because the debtors were found to be bad

• because the debtors amount is too high

• because we apply the concept of prudence

An increase in the provision for doubtful debts would result in _______________.

• an increase in revenue

• an increase in expenses

• a decrease in revenue

• a decrease in expenses

Which of the following is NOT a method of estimating the provision for doubtful debts amount?

• Ageing of debtors analysis

• Experience form past accounting period

• Through a specific formula

• Knowledge of individual debtors

Duran Ltd estimates the balance of its Provision for Doubtful Debts should be $4000 on 30 June. The current balance of the provision account is $3000. The correct General journal entry is:

• Dr. Income statement $4000

  CR. Provision for Doubtful Debts $4000

• Dr. Income statement $1000

  CR. Provision for Doubtful Debts $1000

• Dr. Provision for Doubtful Debts $1000

  CR. Income statement $1000

What is the total provision for doubtful debts at the end of 2016?

• $1 750

• $2 000

• $2 250

• $3 750

The effect of provision for doubtful debts on the income statement in 2017 is

• an increase of $250

• a decrease of $250

• an increase of $500

• a decrease of $500

• 3%

• 5%

• 6%

• 8%

The accounting entry for writing off a bad debt is

• Dr Cash

  Cr Irrecoverable debt

• Dr Provision for doubtful debts

  Cr Irrecoverable debt

• Dr Irrecoverable debt

  Cr Trade payables

• Dr Irrecoverable debt

  Cr Trade receivables

What adjusting entry is necessary to record a decrease in

provision for doubtful debts?

• Dr. Income statement

  Cr. Provisions for doubtful debts

• Dr. Cash

  Cr. Provisions for doubtful debts

• Dr. Provisions for doubtful debts

  Cr. Income statement

• Dr. Trading A/c;

  Cr. Provisions for doubtful debts