PRC-1 · Chapter 5 · Question 22 of 100
The allowance for receivables at 31 October 2011 was Rs. 9,000. During the year, bad debts of Rs. 5,000 were written off. At 31 October 2012, receivables were Rs. 120,000, and a 5% allowance is required. What is the total charge to the Statement of Profit or Loss for 2012?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 2,000
Explanation
Required allowance = 5% x 120,000 = 6,000. Opening allowance = 9,000. Decrease in allowance = 3,000 (credit to expense). Bad debt written off = 5,000 (debit to expense). Net charge = 5,000 - 3,000 = Rs. 2,000.
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