PRC-1 · Chapter 5 · Question 24 of 100
A business has a turnover (sales) of Rs. 2,000,000. Its accounts receivable equal 5% of turnover. The business wishes to create an allowance of 4% of receivables. What is the value of the closing allowance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 4,000
Explanation
Receivables = 5% of 2,000,000 = Rs. 100,000. The allowance is 4% of receivables = 4% of 100,000 = Rs. 4,000.
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