PRC-1 · Chapter 5 · Question 71 of 100
If a business decides that an outstanding balance of Rs. 10,000 is 100% irrecoverable, what is the impact on the 'Allowance for Doubtful Debts' account at the exact moment of the write-off (under standard PRC-1 methodology)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It has no direct impact on the allowance account at that moment.
Explanation
A formal write-off debits Bad Debt Expense and credits Trade Receivables. The Allowance account remains untouched during the write-off and is only adjusted separately at the period-end evaluation.
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