PRC-1 · Chapter 5 · Question 79 of 100
Customer 'Zeta' owes Rs. 12,000 but is refusing to pay due to a quality dispute. The company is suing them. How should this be handled in the accounts?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Maintain the receivable and create a specific allowance for the doubtful amount.
Explanation
Because the debt is disputed but still being pursued (not 100% irrecoverable), it should remain in receivables, but prudence requires creating a specific allowance against the high risk of non-payment.
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