PRC-1 · Chapter 5 · Question 81 of 100
A business has opening receivables of Rs. 80,000. It writes off a debt of Rs. 5,000. It wishes to maintain an allowance of 5%. If the opening allowance was Rs. 3,500, what is the net expense charged to Profit or Loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 5,250
Explanation
Closing allowance = 5% x (80,000 - 5,000) = 3,750. Increase in allowance = 3,750 - 3,500 = 250. Total expense = 5,000 (bad debt) + 250 (allowance increase) = Rs. 5,250.
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