PRC-1 · Chapter 10 · Question 15 of 100
A business has Trade Receivables of Rs. 100 million. A customer owing Rs. 1 million has gone bankrupt and must be written off. The business maintains a 6% allowance for doubtful debts. The opening allowance was Rs. 4 million. What is the total bad and doubtful debt expense for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 2.94 million
Explanation
1. Write off bad debt: Receivables become 99m. Bad debt expense = 1m. 2. Required closing allowance = 99m x 6% = 5.94m. 3. Increase in allowance = 5.94m - 4.0m = 1.94m. Total expense = 1m + 1.94m = 2.94m.
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