PRC-1 · Chapter 5 · Question 3 of 100
Which of the following scenarios best describes a situation where an account should be classified as a 'Bad Debt' rather than a 'Doubtful Debt'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) A customer has been officially declared bankrupt and the liquidator confirms no funds are available.
Explanation
A debt becomes 'bad' (irrecoverable) when there is certain confirmation that the amount will not be paid, such as official bankruptcy with zero payout. Delays and financial difficulties indicate 'doubtful' debts.
More Bad and Doubtful Debts MCQs
- Q5Which of the following statements regarding 'Good Debts' and 'Doubtful Debts' is completely correct?
- Q6What is the correct journal entry to record a year-end INCREASE in the general allowance for doubtful debts?
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- Q8An irrecoverable debt of Rs. 5,000, which was formally written off two years ago, is unexpectedly paid by the customer via cheque. What is…
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