Bad Debts & 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

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

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

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

Alternative term for irrecoverable debts

• Bad debts

• depreciation

Alternative term for trade receivables

• creditor

• debtor

Double entry for irrecoverable debts:

• Dr: Trade receivables and Cr: Irrecoverable debts

• Dr: Irrecoverable debts and Cr: Trade receivables

Irrecoverable debts will have an impact on :

• income

• expense