ICAEW AF · Chapter 10 · Question 9 of 9
What is the effect of writing off an irrecoverable debt on a business's financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Profit decreases and current assets decrease
Explanation
Writing off a debt debits an expense, reducing profit, and credits trade receivables, reducing current assets. Liabilities are not affected and no cash moves. Revenue is not reduced because the sale was genuinely made; the loss is a separate expense.
More Irrecoverable debts and allowances for receivables MCQs
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