PRC-1 · Chapter 5 · Question 14 of 100
'Omega Traders' has a gross Receivables balance of Rs. 200,000. The opening allowance was Rs. 6,000. At year-end, 'Omega' determines the allowance should be 4% of receivables. What is the impact on the Statement of Profit or Loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) An expense of Rs. 2,000
Explanation
The required closing allowance is 4% of 200,000 = Rs. 8,000. The opening balance is Rs. 6,000. The allowance must be increased by Rs. 2,000 (8,000 - 6,000), resulting in an expense charge of Rs. 2,000.
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