PRC-1 · Chapter 5 · Question 26 of 100
Still following the previous scenario (Opening = 3,000, Closing = 4,000). How will the profit for the period be affected by this specific change in the allowance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Profit will be reduced by Rs. 1,000.
Explanation
The allowance increases from 3,000 to 4,000. This Rs. 1,000 increase is charged as an expense, which reduces the net profit by Rs. 1,000.
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