FA – Nov 2011 – L1 – SA – Q15 – Bases of Accounting: Accrual vs. Cash

This question asks for the amount to be credited to the Profit and Loss Account based on a revised provision for doubtful debts.

Question

Calculate the amount to be credited to the Profit and Loss Account if the current provision for doubtful debts is 5%.

Answer

N40,775

Explanation: Trade debtors are N780,500, and the previous provision for doubtful debts was N79,800. A new provision of 5% is to be made, which results in a provision of N39,025 (5% of N780,500). The difference between the previous provision (N79,800) and the new provision (N39,025) is N40,775. This amount is credited to the Profit and Loss Account as the adjustment for over-provision.

Tags: Provision for Doubtful Debts, Trade Debtors
Level: Level 1

Topic: Bases of Accounting: Accrual vs. Cash
Series: NOV 2011

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