Provision for bad debt - Theory Quiz

What should a business do if it finds it impossible to collect a debt?

• Increase the debt amount

• Keep trying to collect it

• Write it off as a bad debt

• Invest more money in the debtor

What is the reason for bad debts according to the text?

• Debtor getting a promotion

• Debtor starting a new business

• Debtor winning a lottery

• Debtor suffering a loss in business

How is bad debt recorded in the business?

• Doubled

• Credited

• Debited

• Ignored

What is the provision for doubtful debts?

• Estimated amount of bad debts likely to arise

• Guaranteed payment from debtors

• Fixed amount of good debts

• Random amount of debts

What is an aging schedule in accounting?

• Table showing accounts receivables by amount

• Table showing accounts receivables alphabetically

• Table showing accounts receivables by due dates

• Table showing accounts receivables randomly

How is the provision for doubtful debts subtracted in the Balance Sheet?

• From Cash/Bank

• From Accounts Payable

• From Accounts Receivable

• From Profit and Loss

What happens when the provision for doubtful debt is increased?

• Doubles the debt

• Remains the same

• Results in income

• Results in an expense

What occurs when a debt written off in previous years is recovered?

• Ignore the debt

• Increase in the debt

• Reinstatement of the debt

• Write off the debt again

Why is it important to reinstate the debt in the ledger account of the customer?

• Detailed history of the account

• To confuse the debtor

• To hide the debt

• To avoid future debts

What is recorded when the debtor pays the whole debt or part thereof after reinstating the debt?

• Debit Cash/Bank, Credit customer's account

• Debit Profit and Loss, Credit customer's account

• Debit customer's account, Credit Profit and Loss

• Debit customer's account, Credit Cash/Bank