PRC-1 · Chapter 5 · Question 77 of 100
An entity has gross receivables of Rs. 868,500. It writes off Rs. 28,500. It then calculates a 5% general allowance on the remainder. If the opening allowance was Rs. 38,000, what is the charge to the Statement of Profit or Loss for the allowance adjustment only?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 4,000 Expense
Explanation
Closing allowance = 5% x (868,500 - 28,500) = 42,000. Opening = 38,000. The increase is 4,000, which is an expense charge for the adjustment.
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