PRC-1 · Chapter 5 · Question 78 of 100
If an entity has a 'Bad and Doubtful Debts Expense' account with a year-end debit total of Rs. 15,000 and a credit total of Rs. 6,000 (from an allowance reduction), what is the final closing entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Profit or Loss Rs. 9,000; Credit Bad and Doubtful Debts Expense Rs. 9,000
Explanation
The net expense balance is a debit of 9,000 (15k - 6k). To close the account, it must be credited by 9,000, and the Profit or Loss account must be debited (recording the expense).
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