Debtors, Bad debts, and Provision for bad debts MCQs
Total debtors=$5000, the closing balance of provision for doubtful debt a/c is $500. Identify what amount should be shown in balance sheet regarding the debtors?
A) $5000-$500=$4500RIGHT ANSWER!!!
B) $5000+$500=$5500 WRONG ANSWER
C) $4500-$500=$5000 WRONG ANSWER
D) $4500-$500=$4000WRONG ANSWER
Which accounting concept dictates the inclusion of “provision for doubtful debts” in the financial statements?
A) Accrual concept WRONG ANSWER
B) Matching conceptWRONG ANSWER
C) Going concern concept WRONG ANSWER
D) Prudence conceptRIGHT ANSWER!!!
Which of the following is an alternative term for “provision for doubtful debts” ?
A) Reserve for doubtful debts WRONG ANSWER
B) Stipulation for doubtful debts WRONG ANSWER
C) Allowance for doubtful debts RIGHT ANSWER!!!
D) Discount for doubtful debts WRONG ANSWER
At the end of accounting period, XYZ company finds out that its total debtors are $10,000. On scrutiny of accounts, it turned out that a bad debt amounting to $1000 was not recorded in the books of accounts. Furthermore, having considered the current economic situation, management of the company decided to increase the provision for doubtful debts by $500. Find out what net amount to be expensed out in the income statement?
A) $10,000 WRONG ANSWER
B) $1000WRONG ANSWER
C) $1500RIGHT ANSWER!!!
D) 11,000 WRONG ANSWER
A firm decided to provide for a 4% or $160 allowance for doubtful debts on all outstanding debts. Which of the following is the value of total outstanding debts of the firm at the time of creating the provision?
A) $2000WRONG ANSWER
B) $5000 WRONG ANSWER
C) $1000WRONG ANSWER
D) 4000$RIGHT ANSWER!!!
Which of the following is a commonly used base to create the provision for doubtful debts?
A) Total purchasesWRONG ANSWER
B) Total credit salesRIGHT ANSWER!!!
C) Total current assetsWRONG ANSWER
D) Total current liabilities WRONG ANSWER
Which of the following debtors have highest probability to default on trade debts?
A) Over 90 days old debtors RIGHT ANSWER!!!
B) 30 to 60 days old debtors WRONG ANSWER
C) 60 to 90 days old debtors WRONG ANSWER
D) Current month debtors WRONG ANSWER
Provision for doubtful debts account is a/an
A) Asset account WRONG ANSWER
B) Contra asset account RIGHT ANSWER!!!
C) Nominal account WRONG ANSWER
D) Liability account WRONG ANSWER
Suppose that provision for doubtful debts account’s opening balance is $3222, closing balance=$5222 and bad debts written off during the accounting period amount to $500. Work out the total amount needed to debit in the profit and loss account?
A) $2500 RIGHT ANSWER!!!
B) $8444WRONG ANSWER
C) $8944WRONG ANSWER
D) $7944WRONG ANSWER
Provision for cash discount on debtors is a percentage of
A) DebtorsWRONG ANSWER
B) Net debtorsWRONG ANSWER
C) Net debtors less provision for doubtful debt RIGHT ANSWER!!!
D) Net salesWRONG ANSWER