PRC-1 · Chapter 5 · Question 85 of 100
A business has an opening allowance of Rs. 4,000. It recovers a bad debt of Rs. 1,500. It requires a closing allowance of Rs. 3,000. There are no bad debts written off. What is the net impact on the Statement of Profit or Loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Income of Rs. 2,500
Explanation
Recovery = 1,500 income. Decrease in allowance (4,000 - 3,000) = 1,000 income. Total net impact = 1,500 + 1,000 = Rs. 2,500 income (or reduction in expense).
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