PRC-1 · Chapter 5 · Question 66 of 100
If a business fails to write off a confirmed bad debt of Rs. 8,000 at year-end, what is the direct impact on the Net Profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Net Profit is overstated by Rs. 8,000.
Explanation
Failing to write off the bad debt means the Bad Debt Expense is not recorded. If expenses are lower than they should be, the reported Net Profit is artificially higher (overstated).
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