PRC-1 · Chapter 5 · Question 33 of 100
Which of the following statements accurately justifies the maintenance of an 'Allowance for Doubtful Debts'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It ensures that accounts receivable are not overstated on the balance sheet, conforming to the prudence and matching concepts.
Explanation
The allowance matches anticipated bad debt losses against the sales revenue of the same period and prevents assets (receivables) from being overstated, satisfying both matching and prudence.
More Bad and Doubtful Debts MCQs
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