PRC-1 · Chapter 5 · Question 19 of 100
An entity has an opening allowance of Rs. 38,000. At year-end, gross receivables are Rs. 868,500. The entity writes off Rs. 28,500 as irrecoverable and decides to maintain a 5% general allowance. What is the INCREASE in the allowance account?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 4,000
Explanation
Remaining receivables after write-off: 868,500 - 28,500 = 840,000. Closing allowance required = 5% x 840,000 = Rs. 42,000. The increase is the closing allowance (42,000) minus the opening allowance (38,000) = Rs. 4,000.
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