Profit and Loss Account Quiz

What is depreciation primarily concerned with?

• The cash flow from operations

• The value of fixed assets

• The revenue generated by sales

• The total liabilities of a firm

Which method is NOT mentioned as a way to charge depreciation?

• Straight-line method

• Written down value method

• Declining balance method

• Units of production method

What do bad debts represent?

• Money that is guaranteed to be paid

• Money that could not be recovered from a debtor

• Money that is expected to be received

• Money that is invested in assets

How is the amount of bad debts recorded?

• Added to the revenue statement

• Charged to the profit and loss account

• Ignored in the financial statements

• Recorded as an asset

What is the purpose of the provision for doubtful debts?

• To estimate potential bad debts

• To enhance cash flow

• To increase profits

• To reduce tax liabilities

When is an expense for probable bad debts recognized?

• When the debts are collected

• As soon as invoices are issued

• At the end of the financial year

• When the debts are written off

What does the journal entry for bad debts include?

• Bad Debt Exp -----Cr

• To Cash Account ------Cr

• Bad Debt Exp -----Dr

• To Receivable Account ------Dr

What is the impact of the provision for doubtful debts?

• Increases the value of debtors

• Eliminates bad debts entirely

• Accelerates recognition of bad debts

• Delays recognition of bad debts

Which of the following is NOT a typical item in the profit and loss account?

• Bad debts

• Provisions

• Inventory

• Depreciation

What does the term 'accrual basis accounting' refer to?

• Recognizing revenue when cash is received

• Recognizing expenses when they are incurred

• Ignoring future expenses

• Only recording cash transactions