Understanding Bad Debts and Provision for Doubtful Debts in Accounting
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Business
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10th Grade - University
•
Hard
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10 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which company is more at risk of incurring bad debts?
Both companies are equally at risk
Neither company is at risk
Company B, which trades on a credit basis
Company A, which deals on a cash basis
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the journal entry when a debt is considered irrecoverable?
Debit Cash Account, Credit Bad Debts Account
Credit Bad Debts Account, Debit Debtors Account
Debit Bad Debts Account, Credit Debtors Account
Credit Cash Account, Debit Debtors Account
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How is a recovered bad debt recorded in the accounts?
Credit Bad Debts Recovered Account, Debit Cash Account
Debit Bad Debts Recovered Account, Credit Cash Account
Debit Debtors Account, Credit Bad Debts Account
Credit Debtors Account, Debit Bad Debts Account
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the purpose of setting aside provisions and reserves?
To pay dividends to shareholders
To reduce tax liabilities
To cover potential future expenses and losses
To increase company profits
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How is a provision for bad debts typically calculated?
As a percentage of total debtors
As a percentage of total sales
As a fixed amount each year
Based on the previous year's bad debts
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What happens if a bad debt arises after the trial balance is finalized?
It is ignored until the next accounting period
It is adjusted directly in the final statement
The trial balance is reopened and adjusted
It is recorded as a new transaction in the next period
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why is it important to maintain adequate reserves for bad debts?
To ensure accurate financial statements
To increase company profits
To avoid paying taxes
To reduce the need for external financing
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