PRC-1 · Chapter 5 · Question 2 of 100
What is the specific nature of the 'Allowance for Doubtful Debts' account in the general ledger?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is a contra-asset account.
Explanation
The allowance for doubtful debts inherently carries a credit balance and is deducted from the gross Trade Receivables (an asset) in the statement of financial position, making it a contra-asset account.
More Bad and Doubtful Debts MCQs
- Q4What is the correct double-entry journal record to write off a confirmed irrecoverable (bad) debt?
- 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?
- Q7If an entity determines that its required closing allowance for doubtful debts is lower than its opening balance, what is the journal…
- 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…