PRC-1 · Chapter 5 · Question 44 of 100
At 1 January, the allowance for doubtful debts was Rs. 35,000. During the year, Rs. 15,000 of debts were written off. At 31 December, the required allowance is evaluated at Rs. 30,000. What is the net impact of these transactions on the Statement of Profit or Loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Net expense of Rs. 10,000
Explanation
Bad debt written off = 15,000 expense. Decrease in allowance = 35,000 - 30,000 = 5,000 income (reduction in expense). Net impact = 15,000 - 5,000 = Rs. 10,000 expense.
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