PRC-1 · Chapter 5 · Question 59 of 100
When calculating the base amount for a General Allowance percentage, which of the following MUST first be deducted from the gross Trade Receivables balance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Both bad debts to be written off and the balances of customers requiring specific allowances
Explanation
The general allowance must only be applied to the remaining 'normal' pool of receivables. Therefore, bad debts (which are zero value) and specific risky balances (which are already provided for) must be deducted first.
More Bad and Doubtful Debts MCQs
- Q61A business wrote off Rs. 25,000 in bad debts during the year. The opening allowance was Rs. 30,000. The required closing allowance is Rs…
- Q62If a business decides to create a specific allowance of 100% against a customer's debt of Rs. 10,000, does this action physically reduce…
- Q63An 'Aging Analysis' schedules outstanding receivables into time brackets (e.g., 30 days, 60 days, 90+ days). Which bracket typically…
- Q64An accountant wrote off a bad debt of Rs. 4,000 by debiting Bad Debt Expense and incorrectly crediting Accounts Payable instead of Trade…
- Q65In the Statement of Financial Position, how is the 'Net Trade Receivables' figure calculated?