Y10 Accounting - C13 Irrecoverable Debts and Doubtful Debts

What is an irrecoverable debt?

• An amount that is always recoverable

• An amount that is paid in cash

• An amount that will not be paid by the credit customer

• An amount that will be paid by the customer

What happens to the total of irrecoverable debts at the end of the year?

• It is transferred to the income statement as an expense

• It is added to the assets

• It is ignored

• It is recorded as income

Which principle is applied when writing off irrecoverable debts?

• Principle of matching

• Principle of revenue recognition

• Principle of prudence

• Principle of consistency

What is the first step when recovering a debt that was previously written off?

• Debit the customer account

• Credit the cash book

• Credit the income statement

• Debit the debts recovered account

What is a provision for doubtful debts?

• A record of all debts owed

• An estimate of potential losses from irrecoverable debts

• A method to increase profits

• A guarantee of payment from customers

How can a business reduce the possibility of irrecoverable debts?

• By offering discounts

• By increasing sales

• By imposing credit limits

• By ignoring overdue accounts

What should be done at the end of the financial year regarding the provision for doubtful debts?

• Transfer all provisions to cash

• Adjust the provision based on estimates

• Increase the provision by 50%

• Ignore the provision

What is the effect of writing off an irrecoverable debt on the financial statements?

• Assets and profit will be overstated

• Only profit will be affected

• Assets and profit will be understated

• No effect on financial statements

Which method is NOT mentioned for recording the recovery of debts written off?

• When the customer account has been closed

• When the debt is partially paid

• When the debt is fully paid

• When the customer account still exists

What should be done with the balance on the provision for doubtful debts account in the statement of financial position?

• Add it to trade receivables

• Deduct it from trade receivables

• Transfer it to cash

• Ignore it