PRC-1 · Chapter 5 · Question 12 of 100
When calculating a General Allowance percentage (e.g., 5%) at year-end, which of the following amounts MUST first be deducted from the gross Trade Receivables balance before applying the percentage?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Any bad debts to be written off, plus the balances of any customers requiring a specific allowance.
Explanation
To calculate the general allowance, the base figure must be the 'healthy' pool of receivables. Therefore, bad debts written off and balances already covered by specific allowances must be excluded from the gross figure before applying the general percentage.
More Bad and Doubtful Debts MCQs
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- Q17Following the previous scenario (Receivables: 150k, Bad debt write-off: 10k, Closing allowance required: 7k). If the opening allowance was…
- Q18How is the Trade Receivables balance presented in the Statement of Financial Position at year-end?