PRC-1 · Chapter 5 · Question 94 of 100
Which of the following is NOT a valid reason for a business to maintain an Allowance for Doubtful Debts?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) To legally guarantee that the business will not have to pay taxes on uncollected invoices.
Explanation
Tax rules vary by jurisdiction and often do not allow tax deductions for general allowances. The accounting reasons are rooted in prudence, matching, and fair presentation of assets.
More Bad and Doubtful Debts MCQs
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- Q99Journal entry to record a decrease in allowance during the year is:
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