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- 1. Multiple Choice
A decrease in the provision for doubtful debts would result in ______________.
a reduction in net profit (profit for the year)
an increase in net profit (profit for the year)
a reduction in gross profit
an increase in gross profit
- 2. Multiple Choice
Why do we need to substract the provision for doubtful debts over the trade receivables/ debtors balance in a statement of financial position/ balance sheet?
because that is the formula
because the debtors were found to be bad
because the debtors amount is too high
because we apply the concept of prudence
- 3. Multiple Choice
An increase in the provision for doubtful debts would result in _______________.
an increase in revenue
an increase in expenses
a decrease in revenue
a decrease in expenses
- 4. Multiple Choice
What is the total provision for doubtful debts at the end of 2016?
$1 750
$2 000
$2 250
$3 750
- 5. Multiple Choice
The effect of provision for doubtful debts on the income statement in 2017 is
an increase of $250
a decrease of $250
an increase of $500
a decrease of $500
- 6. Multiple Choice
The accounting entry for writing off a bad debt is
Dr Cash
Cr Irrecoverable debt
Dr Provision for doubtful debts
Cr Irrecoverable debt
Dr Irrecoverable debt
Cr Trade payables
Dr Irrecoverable debt
Cr Trade receivables
- 7. Multiple Choice
What adjusting entry is necessary to record a decrease in
provision for doubtful debts?
Dr. Income statement
Cr. Provisions for doubtful debts
Dr. Cash
Cr. Provisions for doubtful debts
Dr. Provisions for doubtful debts
Cr. Income statement
Dr. Trading A/c;
Cr. Provisions for doubtful debts
- 8. Multiple Choice
Alternative term for irrecoverable debts
Bad debts
depreciation
- 9. Multiple Choice
Alternative term for trade receivables
creditor
debtor
- 10. Multiple Choice
Purpose of preparing a statement of financial position is to
monitor liquidity position of the business.
measure the profitability of the business
- 11. Multiple Choice
Purpose of preparing a income statement is to
monitor liquidity position of the business.
measure the profitability of the business
- 12. Multiple Choice
Double entry for irrecoverable debts:
Dr: Trade receivables and Cr: Irrecoverable debts
Dr: Irrecoverable debts and Cr: Trade receivables
- 13. Multiple Choice
Irrecoverable debts will have an impact on :
income
expense
- 14. Multiple Choice
An increase in irrecoverable debts will ....
increase expenses
reduce expenses
- 15. Multiple Choice
An increase in irrecoverable debts will ....
increase trade receivables
reduce trade receivables
- 16. Multiple Choice
An increase in irrecoverable debts (bad debt) will ....
increase expenses and reduce profit for the year
reduce expense and increase profit for the year
- 17. Multiple Choice
An increase in irrecoverable debts (bad debt) will ....
increase trade receivables and increase current assets
reduce trade receivables and reduce current assets
- 18. Multiple Choice
The balance of the Provision for Doubtful Debts account as at 1/7/2016 is $500. The new provision should be $300. What is the adjusting entry for the 30/6/2017?
Dr. Income statement $300
Cr. Provision for Doubtful Debts $300
Dr. Income statement $200
Cr. Provision for Doubtful Debts $200
Dr. Provision for Doubtful Debts $300
Cr. Income statement $300
DR. Provision for Doubtful Debts $200
Cr. Income statement $200
- 19. Multiple Choice
The business provides for doubtful debts each year at 2% of the trade receivables balance at the end of the financial year. The balance of the trade receivables is $45,000. What is the amount of Provision for Doubtful Debts?
$900
$9000
$450
$90
- 20. Multiple Choice
Which of the following is not a reason why a business would provide credit?
To increase the amount of sales
To compete with other businesses who are also offering credit
Allows for separation of duties in large business
To enable the use of subsidiary ledgers and control accounts
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