Provision for Doubtful Debts Quiz

Which entry is used when a provision for doubtful debts is increased?

• Dr Provision, Cr Profit & Loss

• Dr Bad Debts, Cr Debtors

• Dr Profit & Loss, Cr Provision for Doubtful Debts

• Dr Debtors, Cr Cash

A previously written-off bad debt is recovered. The correct entries are:

• Dr Bad Debts, Cr Debtors

• Dr Cash, Cr Bad Debts Recovered

• Dr Debtors, Cr Sales

• Dr Provision, Cr Cash

A decrease in the provision for doubtful debts will:

• Reduce net profit

• Increase net profit

• Increase gross profit

• Reduce gross profit

What is the purpose of a provision for doubtful debts?

• To increase tax

• To account for likely non-payments

• To overstate profits

• To reduce purchases

A company maintains a provision for doubtful debts at 3% of trade receivables.

• On 31 December 2022, the provision was $1,800.

• On 31 December 2023, the trade receivables totalled $70,000.

How will the adjustment be recorded in the accounts?

• Credit Provision for doubtful debts $300; Deduct from Gross Profit $300

• Debit Provision for doubtful debts $300; Add to Gross Profit $300

• Credit Provision for doubtful debts $300; Add to Gross Profit $300

• Debit Provision for doubtful debts $300; Deduct from Gross Profit $300

Entry for writing off bad debt of $600?

• Dr Debtors, Cr Bad Debts

• Dr Bad Debts, Cr Debtors

• Dr Provision, Cr Debtors

• Cr Sales, Dr Debtors

Which concept supports provision creation?

• Consistency

• Matching

• Prudence

• Accrual

What is affected when a debt is written off?

• Assets decrease

• Profit decreases

• Sales increase

• Debtors increase