Bad Debt and Provision for Bad Debt

What are the double entries to record bad debt?

• dr. Bad Debt, cr. Provision for Bad Debt

• dr. Profit and Loss, cr. Bad Debt

• dr. Bad debt, cr. Profit and Loss

• dr. Bad debt, cr. Debtor

What effect does bad debts have on debtors?

• it increases debtors

• it decreases debtors

• it has no effect on debtors

• none of the above

The double entries to record an increase in provision for bad debts are?

• dr. Profit and Loss, cr. Provision for Doubtful debts

• dr. Bad debt, cr. provision for Bad debt

• dr. Provision for bad debt, cr. Profit and Loss

• dr. Provision for bad debt, cr. Bad debt

What are the double entries to record a decrease in Provision for bad debts?

• dr. Debtors, cr. Provision for bad debt

• dr. Profit and Loss, cr. Provision for bad debt

• dr. Provision for bad debt, cr. Profit and Loss

• dr. Provision for bad debt, cr. Debtors

1 Jan Provision for bad debt $500

31 Dec Provision for bad debt $400

How should the decrease in the provision be treated in the Profit and Loss account?

• add $400 to expenses

• add $500 to expenses

• deduct the $100 increase from expenses

• add the $100 decrease to Gross Profit

Which of the following statements is TRUE about bad debts?

• it has a debit balance

• it is the same as the Provision for bad debts

• it is entered in the Balance Sheet

• it has a credit balance

2005 2006

Debtors $2800 $3100

Provision for bad debt $280 $310

What amount for Net Debtors should appear in the Balance Sheet for 2006?

• $2520

• $2790

• $2510

• $3410

Bad debts can be classified as:

• a current asset

• a current liability

• an expense

• a revenue

What are the double entries to create a Provision for bad debts?

• dr. Provision for bad debts, cr. Profit and Loss

• dr. Profit and Loss, cr. Provision for bad debts

• dr. Bad debts, cr. Provision for bad debts

• dr. Debtors, cr. Provision for bad debts

Year 1 Year 2

Debtors 10000 12000

Provision is 5% of debtors.

What is the amount of the provision to be charged in the Profit and Loss account for the second year?

• $100

• $600

• $500

• $400