Question 5 Not yet answered November 2012 was RM78,600. Robert has decided that

Question

Question 5 Not yet answered November 2012 was RM78,600. Robert has decided that a balance of Marked out of 1.00 P Flag question at 1 December 2011 was RM1,200 1. C3.The total amount owed to Robert by his customers at 30 RM600 should be written off as it is irrecoverable, and that, based on past experience, an allowance equal to 11/2% of the remaining trade receivables balance should be made. His provision for doubtful debts How should the movement in the provision for doubtful debts account be reflected in the Statement of Comprehensive Income? Select one: a. a credit of RM30 b. a credit of RM21 c. a charge of RM30 d. a charge of RM21

Explanation / Answer

The provision for doubtful debt is crediting the amount in provision for doubtful debts accounts and debiting the income statement. This amount is shown as deduction from the accounts receivable in the balance sheet. Any bad debts expenses are to be written off in the income statement directly. At the end of every year, the provision for doubtful debts are calculated as percentage of closing balance of accounts receivable. The difference between the balance in the provision for doubtful debts account and provision for doubtful calculated at the end of period is charges to the income statement.

Provision for doubtful debts = (78,600-600)*1.5% = RM1,170

Since there is already credit balance in the provision for doubtful debts accounts of RM1,200. Now, we will need to debit provision for doubtful debts accounts by RM30 and credit it in the Statement of comprehensive income.

Correct answer: a. a Credit of RM30

Please provide your valuable feedback if the answer is helpful.

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