PRC-1 · Chapter 5 · Question 84 of 100
If an accountant calculates the required closing allowance to be Rs. 5,000, but mistakenly credits the Trade Receivables account directly instead of the Allowance account, what is the consequence?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Net Trade Receivables will be correctly stated, but Gross Receivables will be understated.
Explanation
Crediting Trade Receivables physically removes the 5k from the gross balance. The Net presentation will mathematically be the same, but the formal Gross figure and contra-asset presentation will be structurally incorrect.
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