PRC-1 · Chapter 5 · Question 38 of 100
When a company formally writes off a bad debt, how does this singular action affect the 'Net Trade Receivables' presented in the Statement of Financial Position (assuming the allowance percentage stays identical)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It decreases Net Trade Receivables by the gross amount of the write-off.
Explanation
Writing off a debt physically removes that asset from the gross receivables balance. Consequently, the final Net Trade Receivables figure presented will be lower.
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