PRC-1 · Chapter 5 · Question 13 of 100
'Delta Corp' has a gross Trade Receivables balance of Rs. 100,000. The opening allowance for doubtful debts was Rs. 5,000. At year-end, the company decides to maintain the allowance at 5% of gross receivables. What is the charge to the Statement of Profit or Loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 0
Explanation
The required closing allowance is 5% of 100,000 = Rs. 5,000. Since the opening allowance is already Rs. 5,000, no increase or decrease is necessary. Thus, the charge to the Statement of Profit or Loss is Rs. 0.
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