Commerce Department Baghdad Campus IUB

MCQ Practice Questions for Bad Debts &

Allowances for Doubtful Debts

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Commerce Department Baghdad Campus IUB

MULTIPLE CHOICE QUESTIONS (MCQs)

01. The opening balance of “allowance for doubtful debts account” is Rs. 1,000 whereas the closing
balance of Receivables account is Rs. 100,000.
Page | 2
What amount of allowance for doubtful debts should be charged to statement of comprehensive
income using a 5% allowance for doubtful debts for the current accounting period?
(a) Rs. 4,000 (b) Rs. 5,000
(c) Rs. 2,000 (d) Rs. 1,000
02. At December 31, 2018 an entity‟s receivable totalled Rs. 600,000 and an allowance for bad and
doubtful debts of Rs. 60,000 had been brought down from last year.
It was decided to write off the debts totalling Rs. 25,000 and to adjust allowance for receivable
@ 10% of the receivable.
At what amount receivables are to be shown in statement of financial position as at 31 December
2018?
(a) Rs. 572,500 (b) Rs. 517,500
(c) Rs. 540,000 (d) Rs. 575,000
03. A business has closing receivables balance is Rs. 75,000. It includes one of the accounts
receivable named Ali, who is going through financial crisis. It is expected that he can pay 75% of
his total debt of Rs. 5,000. Business has decided to calculate an allowance for doubtful debt at
5%.
What is the amount of allowance to be deducted from receivable in statement of financial
position?
(a) Rs. 3,500 (b) Rs. 3,750
(c) Rs. 7,250 (d) Rs. 4,750
04. The nature of “Allowance for doubtful debt” account is:
(a) Contra asset account (b) Asset account
(c) Expense (d) Liability account
05. At the end of accounting period, KLM Company finds out that its total Receivables are Rs.
10,000. On scrutiny of accounts, it turned out that a bad debt amounting to Rs. 1,000 was not
recorded in the books of accounts. Furthermore, having considered the current economic
situation, management of the company decided to increase the allowance for doubtful debts by
Rs. 500.
Find out what net amount to be expensed out in the statement of comprehensive
income? (a) Rs. 10,000 (b) Rs. 1000
(c) Rs. 11,000 (d) Rs. 1500
06. At January 1, 2017 the allowances for receivable of Sidra was Rs. 35,000. During the year ended
31 December 2017 debts totalling Rs. 15,000 were written off. It was decided that the allowance
for doubtful debts should be Rs. 30,000 as at December 31, 2017.
What amount should be charged to statement of comprehensive income of Sidra for bad and
doubtful debts expense?
(a) Rs. 30,000 (b) Rs. 45,000
(c) Rs. 15,000 (d) Rs. 10,000

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07. Which of the following can be most relevant to calculation of allowance for doubtful debts?
(a) Total credit sales (b) Total credit purchases
(c) Total current assets (d) Total current liabilities
08. At January 1, 2017 the balance in allowance for receivable showed Rs. 16,000. At the end of the Page | 3
year it is decided to write off Rs. 9,000 and adjust allowance for receivable to Rs. 18,000.
What will be the effect of this decision on profit for the year?
(a) Decrease by Rs. 27,000 (b) Increase by Rs. 18,000
(c) Decrease by Rs. 11,000 (d) Decrease by Rs. 9,000
09. Sania creates allowance for doubtful debts after considering the length of time the debt remains
outstanding.
She has provided following data as at 31st March 2018
Debt amount Rs. Days outstanding Allowance required
130,000 30 days Nil
75,000 31-60 2%
50,000 Over 60 days 5%

Opening balance of allowance for doubtful debts was Rs. 3,500.

What is the amount to be charged to statement of comprehensive income for the year?
(a) Rs. 4,000 (b) Rs. 3,500
(c) Rs. 500 (d) Rs. 7,500
10. Which of the following Receivables have highest probability to default on trade debts?
(a) Current month Receivables (b) Over 90 days old Receivables
(c) 60 to 90 days old Receivables (d) 30 to 60 days old Receivables
11. A business has received an amount of Rs. 1,000 from a receivable that had been previously
written off as irrecoverable.
What is the correct accounting entry to record the transaction?
(a) Dr Cash 1,000 Cr Bad and doubtful debts expense a/c Rs. 1,000
(b) Dr Cash 1,000 Cr Receivables Rs. 1,000
(c) Dr Statement of comprehensive income Rs. 1,000 Cr Receivables Rs. 1,000
(d) Dr Statement of comprehensive income Cr Cash Rs. 1,000
12. A business has provided following information;
Rs.
Opening receivables 45,000
Credit sales 55,000
Cash sales 10,000
Cash received from customers 35,000
Bad debts written off 2,000
Discount received (separate ledger) 3,000

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The business maintains allowance at 2% of receivables each year.

What accounting entry is to be passed to record the increase/ decrease of allowance to the
statement of comprehensive income?
(a) Dr Bad and doubtful debts expense Rs. 360 Cr Allowance for doubtful debts Rs. 360
Page | 4
(b) Dr Allowance for doubtful debts Rs. 360 Cr Bad and doubtful debts expense Rs. 360
(c) Dr Bad and doubtful debts expense Rs. 360 Cr Receivables. 360
(d) Dr Receivables Rs. 360 Cr Bad and doubtful debts expense Rs. 360
13. At year end, the receivable balance on 31 March 2019 is Rs. 93,000. This includes a debt of Rs.
1,800 which needs to be written off.
The business maintains allowance for doubtful debts at 5% of Receivable balance. And this year
allowance has increased by 20% as compared to last year.
What was the balance of Allowance for doubtful debts at 1 April 2018?
(a) Rs. 3,875 (b) Rs. 5,472
(c) Rs. 3,800 (d) Rs. 4,560
14. At 30 September 2012 an entity‟s allowance for receivables amounted to Rs. 38,000, which was
five per cent of the receivables at that date.
At 30 September 2013 receivables totalled Rs. 868,500. It was decided to write off Rs. 28,500 of
debts as irrecoverable and, based on past experience, to keep the allowance for receivables at 5%
of receivables.
What should be the charge in the statement of comprehensive income for the year ended
30 September 2013 for the total of bad debts and the allowance for receivables?
(a) Rs. 42,000 (b) Rs. 33,925
(c) Rs. 70,500 (d) Rs. 32,500
15. The allowance for receivables in the accounts at 31 October 2011 was Rs. 9,000. During the year
ended 31 October 2012, bad debts of Rs. 5,000 were written off.
The receivables balance at 31 October 2012 was Rs. 120,000 and, based on past experience, the
entity wishes to set the allowance at 5% of receivables.
What is the total charge for bad debts and the allowance for receivables in the statement of
comprehensive income for the year ended 31 October 2011?
(a) Rs. 2,000 (b) Rs. 3,000
(c) Rs. 5,000 (d) Rs. 8,000
16. Hamza has following information available for his business for the year ended 31st December
2017:
Opening allowance for doubtful debts Rs. 5,000
Bad debts written off during the year Rs. 3,000
Bad debts recovered Rs. 1,500
Closing receivables Rs. 90,000
Closing allowance for doubtful debts 5%.
What is the net charge for bad and doubtful debts for statement of comprehensive income?
Rs.

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17. At June 30, 2016 an entity‟s allowance for receivable amounted to Rs. 25,000 which was 2% of
the trade receivables at that date.
At June 30, 2017 trade receivable amounted to Rs. 310,000. It was decided to write off
Rs. 30,000 of debts as irrecoverable and to keep the allowance for receivable at 2% of trade
receivable. Page | 5
At what amount receivables would be shown in statement of financial position at 30 June 2017?
Rs.
18. At July 1, 2017Mira‟s allowance for receivable was Rs. 65,000.
At June 30, 2018 trade receivable amounted to Rs. 650,000. It was decided to write off Rs.
95,000 of these debts and adjust the allowance for receivable to Rs. 75,000.
At what amount receivables (net) to be appear in statement of financial position?
Rs.
19. At January 1, 2018 the balance in allowance for receivable showed Rs. 38,000. At the end of the
year it is decided to write off Rs. 16,000 and adjust allowance for receivable to Rs. 35,000.
What will be the charge for bad and doubtful debts for the year?
Rs.
20. After writing off bad debts, Rashid has outstanding receivables of Rs. 238,750. He identifies two
specific amounts for which he wishes to make full allowance:
 Rs. 450 owing by Syed
 Rs. 1,200 owing by Raja
Rashid also wishes to maintain a general allowance of 5% of outstanding receivables.
What amount is shown on Rashid‟s statement of financial position in respect of receivables?
Rs.
21. Which of the following is the effect on net profit if a business decreases provision for doubtful
debts?
(a) It will increase net profit (b) It will decrease net profit
(c) It will increase gross and net profit (d) No effect
22. What is the nature of allowance for doubtful debt account?
(a) An asset (b) A liability
(c) An equity (d) Contra asset account
23. Is there a difference in bad and double debts?
(a) No, they are inter-changeable
(b) Yes, bad debt refers to an account receivable that has been clearly identified as not being
collectible. Whereas a doubtful debt is an account receivable that might become a bad
debt at some point in the future
(c) Yes, doubtful debt refers to an account receivable that has been clearly identified as not
being collectible. Whereas a bad debt is an account receivable that might become a bad
debt at some point in the future
(d) They are synonymous

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24. What is the double entry for recording write-off of any of debts?
(a) Bad debt expense (debit) and allowance for doubtful debts (credit)
(b) Bad debt expense (debit) and accounts receivable (credit)
(c) Allowance for doubtful debts (debit) and accounts receivable (credit) Page | 6
(d) None of the above
25. On June 1, Rs. 800,000 of goods are sold with credit terms of 1/10, n/30. How much should the
seller expect to receive if the buyer pays on June 8?
(a) 720,000 (b) 768,000
(c) 792,000 (d) No change
26. On June 1, Rs. 800,000 of goods are sold with credit terms of 1/10, n/30. On June 3, the customer
returned Rs. 100,000 of the goods.
How much should the seller expect to receive if the buyer pays on June 8?
(a) 692,000 (b) 693,000
(c) 694,000 (d) 700,000
27. Which account should be credited for Rs180,000 when writing off the account?
(a) Accounts receivable (b) Allowance for doubtful debts
(c) Bad debts expense (d) None of the above
28. Sorting an entity's accounts receivable into classifications such as current, 1-30 days past due, and
31-60 days past due etc. is known as the?
(a) Ratio analysis (b) Trend analysis
(c) Debtor‟s analysis (d) Aging analysis
29. The opening balance of “allowance for doubtful debts account” is Rs. 1,000 whereas the closing
balance of Receivables account is Rs. 100,000.
What amount of allowance for doubtful debts should be charged to statement of profit or loss
using a 5% allowance for doubtful debts for the current accounting period?
(a) Rs.3,000 (b) Rs.4,000
(c) Rs.5,000 (d) Rs.6,000
30. The Allowance for doubtful debts account has a year-end credit balance, prior to adjustment of
Rs.500. The bad debts are estimated at 7% of Rs. 60,000 of outstanding accounts receivable.
After the appropriate adjusting entry to recognize the bad debt expense, the Allowance for
Doubtful Accounts should have a credit balance.
(a) Rs.4,200 (b) Rs.3,700
(c) Rs.3,200 (d) Rs.4,500
31. Good Traders (GT) accounts receivable totalled Rs. 80,000 at the year end. These include Rs. 900
of long overdue debts that might still be recoverable, but for which GT has created an allowance
for doubtful debts. GT has also provided an allowance of Rs. 1,582, which is 2% of the other
accounts receivable balances. What best describes GT‟s doubtful debt allowance as at its year
end?
(a) A specific allowance of Rs. 900 and a general allowance of Rs. 1,582
(b) A specific allowance of Rs. 1,582 and a general allowance of Rs. 900
(c) A specific allowance of Rs. 2,482
(d) A general allowance of Rs. 2,482
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32. The opening balance on Jamal Enterprises‟ receivables expense allowance was Rs. 1,000. Jamal
wrote off Rs. 4,000 of bad debts during the year. The closing balance on the doubtful debts
allowance was Rs. 1,200.
What is the total charge to Jamal Enterprises‟ Statement of Profit or Loss in respect of
receivables expense for the year? Page | 7
(a) Rs. 200 (b) Rs. 3,800
(c) Rs. 4,000 (d) Rs. 4,200
33. The turnover in an entity was Rs. 2 million and its accounts receivable were 5% of turnover. The
entity wishes to have an allowance for doubtful debts of 4% of receivables, which would make
the allowance one-third higher than the current allowance. How will the profit for the period
affected by the change in allowance?
(a) Profit will be reduced by Rs. 1,000
(b) Profit will be increased by Rs. 1,000
(c) Profit will be reduced by Rs. 1,333
(d) Profit will be increased by Rs. 1,333
34. The allowance for doubtful debts in the ledger of Boom Boom Traders (BBT) at 31 October 2021
was Rs. 9,000. During the year ended 31 October 2022, irrecoverable debts of Rs. 5,000 were
written off. Accounts receivable balances at 31 October 2022 were Rs. 120,000 and BBT policy
is to have a general allowance of 5%. What is the charge for bad & doubtful debts expense in the
Statement of Profit or Loss for the year ended 31 October 2022?
(a) Rs. 2,000 (b) Rs. 3,000
(c) Rs. 5,000 (d) Rs. 8,000
35. During the year ended 31 December 2019 Faisal Traders (FT) turnover totalled Rs. 3,000,000, its
accounts receivable amounting to 4% of turnover for the year. FT wishes to maintain its doubtful
debt allowance at 3% of accounts receivable, and discovers that the allowance, as a result is 25%
higher than it was a year before. During the year specific irrecoverable debts of Rs. 3,200 were
written off and irrecoverable debts (written off three years previously) of Rs. 150 were recovered.
What is the net charge for bad and doubtful debts for the year ended 31 December
2019? (a) Rs. 720 (b) Rs. 900
(c) Rs. 3,770 (d) Rs. 3,950
36. Which of the following statements concerning an allowance for receivables is INCORRECT?
(a) All businesses may create an allowance for doubtful debts in case credit sale customers
do not pay their debts
(b) The receivables account balance is written off when a specific allowance for doubtful
debts for that customer is created
(c) Setting up an allowance for doubtful debts account ensures that receivables are not
overstated
(d) The allowance is usually expected to increase as the value of sales revenue recognized
increases as a firm expands
37. An irrecoverable debt written off two years ago is unexpectedly recovered and entered in the cash
book.
What adjustment, if any, will be necessary?
(a) Credit Receivables (b) Credit Bad debts expense
(c) Credit Suspense account (d) No adjustment will be necessary
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38. An increase in the allowance for doubtful debts results in:

(a) A decrease in current liabilities (b) An increase in net profit
(c) An increase in current assets (d) A decrease in current assets
39. At 30 September 2014, PSL Traders had an allowance for doubtful debts of Rs. 37,000. During Page | 8
the year ended 30 September 2015 the PSL Traders wrote off debts totalling Rs. 18,000 and at the
end of the year it is decided that the allowance for doubtful debts should be Rs. 20,000.
What should be included in the Statement of Profit or Loss for bad and doubtful debts?
(a) Rs. 35,000 debit (b) Rs. 1,000 debit
(c) Rs. 38,000 debit (d) Rs. 1,000 credit
40. At 31 March Salma was owed Rs. 47,744 by her customers. At the same date her doubtful debts
allowance was Rs. 3,500. How should these balances be reported on Salma's statement of
financial position at 31 March?
(a) Rs. 44,244 as a current asset
(b) Rs. 3,500 as a current asset and Rs. 47,744 as a current liability
(c) Rs. 47,744 as a current asset and Rs. 3,500 as a current liability
(d) Rs. 51,244 as a current asset
41. What is the purpose of maintaining an allowance for doubtful debts?
(a) An estimate of future irrecoverable debts
(b) Records the expense of irrecoverable debts
(c) Matches the estimated cost of future irrecoverable debts against the revenue earned in
giving rise to the potential irrecoverable debts
(d) Records irrecoverable debts without taking them out of the books of an entity, thus
showing the gross and expected amount owned by trade receivables as a current asset
42. The existence of an allowance for bad or doubtful debts
(a) Increases the total of current liabilities (b) Reduces the cost of sales
(c) Reduces the total of current assets (d) None of above
43. A transfer to close the bad and doubtful debts account is to:
(a) The statement of financial position
(b) The Statement of Profit or Loss
(c) The trading account
(d) The allowance for doubtful debts account
44. At 31 December 2022 an entity's receivables totalled Rs. 400,000 and an allowance for
receivables of Rs. 50,000 had been brought forward from the year ended 31 December 2021. It
was decided to write off debts totalling Rs. 38,000 and to adjust the allowance for receivables to
10% of the receivables. What charge for bad and doubtful debts should appear in the entity's
Statement of Profit or Loss for the year ended 31 December 2022?
(a) Rs. 74,200 (b) Rs. 51,800
(c) Rs. 28,000 (d) Rs. 24,200

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45. At 30 September 2022 an entity's allowance for receivables amounted to Rs. 38,000, which was
5% of the receivables at that date. At 30 September 2023 receivables totalled Rs. 868,500. It was
decided to write off Rs. 28,500 of debts as irrecoverable and to keep the allowance for receivables
at 5% of receivables. What should be the charge in the Statement of Profit or Loss for the year
ended 30 September 2023? Page | 9
(a) Rs. 42,000 (b) Rs. 33,925
(c) Rs. 70,500 (d) Rs. 32,500
46. Saima creates allowance for doubtful debts according to the length of time the debt has been
outstanding. At 31 May 2021 the analysis of accounts receivable balances and the associated
allowance was:
Time debt has been outstanding Allowance required Balance at 31 May 2021
Less than 31 days Nil 32,700
31 – 60 days 4% of balances 16,900
Over 60 days 50% of balances 8,750

If the balance at 1st June 2020 was Rs. 5,600, what adjustment should be made to the doubtful
debts allowance?
(a) An increase of Rs. 5,051 (b) A decrease of Rs. 5,051
(c) An increase of Rs. 549 (d) A decrease of Rs. 549
47. Multan Sultans‟ (MS) receivables ledger account shows a balance at the end of the year of Rs.
58,200 before making the following adjustments:
(i) MS wishes to write off debts amounting to Rs. 8,900 as he believes they are
irrecoverable.
(ii) MS also wishes to make specific allowance for Lahore Qalandars‟ debt of Rs. 1,350 and
Islamabad United‟s debt of Rs. 750.
(iii) MS wishes to maintain a general allowance of 3% of the year and receivables balance.
MS‟s allowance for receivables at the last year end was Rs. 5,650. What is the charge to the
Statement of Profit or Loss in respect of the above?
(a) Rs. 6,766 (b) Rs. 11,034
(c) Rs. 6,829 (d) Rs. 10,971
48. In the statement of financial position at 31 December 2015, Karachi Kings (KK) reported net
receivables of Rs. 12,000. During 2016 KK made sales on credit of Rs. 125,000 and received
cash from credit customers amounting to Rs. 115,500. At 31 December 2016, KK wished to write
off debts of Rs. 7,100 and increase the allowance for receivable by Rs. 950 to Rs. 2,100. What is
the net receivables figure at 31 December 2016?
(a) Rs. 12,300 (b) Rs. 13,450
(c) Rs. 14,400 (d) Rs. 15,550
49. In the year ended 30 September 2018. Quetta Gladiators (QG) had sales of Rs. 7,000,000. Year-
end receivables amounted to 5% of annual sales. QG wishes to maintain the allowance for
receivables at 4% receivables and as a result discovers that the allowance is 20% higher than at
the previous year end. During the year irrecoverable debts amounting to Rs. 3,200 were written
off and debts amounting to Rs. 450 and previously written off were recovered.
What are the bad and doubtful debt expenses for the year?
(a) Rs. 5,083 (b) Rs. 5,550

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(c) Rs. 5,583 (d) Rs. 16,750

Page | 10

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50. Peshawar Zalmi (PZ) started the year with total receivables of Rs. 87,000 and an allowance for
receivables of Rs. 2,500. During the year, two specific debts were written off, one for Rs. 800 and
the other for Rs. 550. A debt of Rs. 350 that had been written off as irrecoverable in the previous
year was paid during the year. At the year end, total receivables were Rs. 90,000 and the
allowance for receivables was Rs. 2,300. Page | 11
What is the charge to the Statement of Profit or Loss for the year in respect of bad and doubtful
debts?
(a) Rs. 800 (b) Rs. 1,00
(c) Rs. 1,150 (d) Rs. 1,550
51. Newell‟s receivables‟ ledger control account shows a balance at the end of the year of Rs.58,200
before making the following adjustments:
(i) Newell wishes to write off debts amounting to Rs.8,900 as he believes that they are
irrecoverable.
(ii) He also wishes to make an allowance for Carroll‟s debt of Rs.1,350 and Juff‟s debt of
Rs.750.
Newell‟s allowance for receivables at the last year end was Rs.5,650.
What is the total charge to the statement of profit or loss in respect of the above?
Rs.
52. In the statement of financial position at 31 December 20X5, Boris reported net receivables of
Rs.12,000. During 20X6 he made sales on credit of Rs.125,000 and received cash from credit
customers amounting to Rs.115,500. At 31 December 20X6, Boris wished to write off debts of
Rs.7,100 and increase the allowance for receivables by Rs.950 to Rs.2,100.
What is the net receivables figure to include in the statement of financial position at 31 December
20X6?
Rs.
53. At 1 July 20X5, Arthur‟s allowance for receivables was Rs.48,000. At 30 June 20X6, trade
receivables amounted to Rs.838,000. It was decided to write off Rs.72,000 of these debts and
adjust the allowance for receivables to Rs.60,000.
What are the final amounts for inclusion in Arthur‟s statement of financial position at 30 June
20X6?
Trade Allowance for Net balance
receivables receivables
Rs. Rs. Rs.
A 838,000 60,000 778,000
B 766,000 60,000 706,000
C 766,000 108,000 658,000
D 838,000 108,000 730,000
54. In the year ended 30 September 20X8, Fauntleroy had sales of Rs.7,000,000. Year-end
receivables amounted to 5% of annual sales. At 1 October 20X7, the allowance for receivables
was Rs.11,667 and this should be increased to Rs.14,000 at 30 September 20X8.
During the year ended 30 September 20X8, irrecoverable debts amounting to Rs.3,200 were
written off and debts amounting to Rs.450 which had been written off previously were recovered.
What is the irrecoverable debt expense for the year?
Rs.

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55. On 1 January 20X3 Tipton‟s trade receivables were Rs.10,000. The following information relates
to the year ended 31 December 20X3:
Rs.
Credit sales 100,000
Cash receipts 90,000 Page | 12
Irrecoverable debts written off in year 800
Discounts received 700
Cash receipts include Rs.1,000 in respect of a receivable previously written off.
What was the carrying amount of receivables at 31 December 20X3?
Rs.
56. A business has been notified that a customer who owed Rs.500 has been declared insolvent. The
business had previously made an allowance against this receivable.
What accounting entries are required to account for the amount due from the insolvent customer?
Debit Credit
A Irrecoverable debts account Receivables‟ ledger control
account B Receivables‟ ledger control
account Irrecoverable debts account
C Allowance for receivables account Receivables‟ ledger control
account D Receivables‟ ledger control
account Allowance for receivables account
57. Headington was owed Rs.37,500 by its customers at 1 January 20X8 and Rs.49,000 at 31
December 20X8.
During the year, cash sales of Rs.263,500 and credit sales of Rs.357,500 were made, contras with
the payables ledger control account amounted to Rs.1,750 and discounts received totalled
Rs.21,400. Irrecoverable debts of Rs.3,500 were written off and Headington wishes to increase its
allowance for receivables from Rs.7,500 to Rs.10,000.
What was the cash received from receivables during the year ended 31 December
20X8? Rs.
58. Alex had total receivables of Rs.87,000 and an allowance for receivables of Rs.2,500 at the start
of the accounting year.
During the year, two specific debts were written off, one for Rs.800 and the other for Rs.550. A
debt of Rs.350 that had been written off as irrecoverable in the previous year was paid during the
year. At the year-end, total receivables were Rs.90,000 and the allowance for receivables was
Rs.2,300.
What was the charge to the statement of profit or loss for the year in relating to irrecoverable
debts and the change in the allowance for receivables?
Rs.
59. What is the effect of an increase in the allowance for
receivables? A It will result in an increase in net current assets
B It will result in a decrease in net current assets
C It will result in an increase in sales
D It will result in a decrease in drawings
60. At 31 December 20X7, Chester‟s receivables‟ balance was Rs.230,000. He wishes to make
specific allowance for Emily‟s debt of Rs.450, Lulu‟s debt of Rs.980 and Sandy‟s debt of
Rs.5,000.

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What amount should be credited to the statement of profit or loss relating to the allowance for
receivables if the allowance at 1 January 20X7 was Rs.11,700?
Rs.

Page | 13

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61. At 31 March 20X9 Sally was owed Rs.47,744 by her customers. At the same date her allowance
for receivables was Rs.3,500.
How should these balances be reported on Sally‟s statement of financial position at 31 March
20X9?
A Rs.44,244 as a current asset Page | 14
B Rs.3,500 as a current asset and Rs.47,744 as a current liability
C Rs.47,744 as a current asset and Rs.3,500 as a current liability
D Rs.51,244 as a current asset
62. The allowance for receivables in the ledger of Bertie at 31 October 20X1 was Rs.9,000. During
the year ended 31 October 20X2, irrecoverable debts of Rs.5,000 were written off.
Accounts receivable balances at 31 October 20X2 were Rs.120,000 and, based upon a review of
receivables at that date, the allowance for receivables required was Rs.6,000.
What was the total charge for irrecoverable and debts and change in allowance for receivables in
the statement of profit or loss for the year ended 31 October 20X2?
Rs.
63. At 1 November 20X4 Dorothy‟s receivables allowance was Rs.5,670. At 31 October 20X5 she
was owed Rs.275,600 by her customers. Following a review of receivables Dorothy has
determined that an allowance of Rs.5,512 is required at 31 October 20X5.
What amount should be credited in Dorothy‟s statement of profit or loss for the year ended 31
October 20X5 relating to the change in the allowance for receivables?
Rs.
64. Which of the following is the correct definition of a provision?
A A provision is an amount that may need to be paid by a business
B A provision is a liability of uncertain timing or amount
C A provision is a specific amount that will be paid on a specified date
D A provision is an amount that may not need to be paid by a business
65. Roberto commenced trading on 1 January 20X5 selling microwave ovens at a price of Rs.300
each. He allows customers one month from the date of sale to return goods if they are
unsatisfactory for any reason and customers will be given a full refund. During his first year of
trading to 31 December 20X5, he sold 150 microwave ovens each month and, on average, five
microwave ovens are returned in the month following sale. Customer refunds are made in the
same month as the microwave is returned.
What provision should be included in Roberto‟s financial statements for the year ended 31
December 20X5?
Rs.
66. Kate allows customers to return faulty goods within 10 days of purchase. At 31 October 20X4 she
had a provision of Rs.6,548 for sales returns. At 31 October 20X5 she calculated that the
provision required should be Rs.4,940.
What should be reported in Kate‟s statement of profit or loss for the year to 31 October 20X5 in
relation to this provision?
A A charge of Rs.4,940
B A credit of Rs.4,940
C A credit of Rs.1,608
D A charge of Rs.1,608

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Commerce Department Baghdad Campus IUB

67. Luca is a second-hand motorcycle dealer. If a motorcycle develops a fault within 60 days of the
sale, Luca will repair it under warranty free of charge. At 30 September 20X7 Luca had made a
provision for warranty repairs of Rs.5,500. At 30 September 20X6, Luca estimated that the
provision required for warranty repairs should be Rs.6,300.
What accounting entries should be made by Luca to account for the increase in the provision Page | 15
required at 30 September 20X6?
A Debit Warranty repairs Rs.800, and Credit Provision Rs.800
B Debit Warranty repairs Rs.6,300, and Credit Provision Rs.6,300
C Debit Provision Rs.800, and Credit Warranty repairs Rs.800
D Debit Provision Rs.6,300, and Credit Warranty repairs Rs.6,300
68. Owen allows customers to return faulty goods within 14 days of purchase. At 30 November 20X5
he made a provision of Rs.6,548 for sales returns. At 30 November 20X6 he calculated that his
provision should be Rs.7,634.
What should be reported in Owen‟s statement of profit or loss for the year to 30 November 20X6
in relation to this provision?
A A charge of Rs.7,634 B A credit of Rs.7,634
C A charge of Rs.1,086 D A credit of Rs.1,086
69. Darren is a second-hand car dealer. If a car develops a fault within 30 days of the sale, Darren
will repair it free of charge. At 30 April 20X4 Darren had made a provision for repairs of
Rs.2,500. At 30 April 20X5 he calculated that his provision should be Rs.2,000.
What entry should be made for the provision in Darren‟s statement of profit or loss for the year to
30 April 20X5?
A A charge of Rs.500 B A credit of Rs.500
C A charge of Rs.2,000 D A credit of Rs.2,000
70. At 30 April 20X7 the total amount owed to James by his customers was Rs.54,864. At the same
date, James calculated that his receivables allowance is Rs.3,775.
How should these balances be reported in James' statement of financial position as at 30 April
20X7?
A Rs.51,089 as a current asset B Rs.51,089 as a current liability
C Rs.54,864 as a current asset and Rs.3,775 as a current liability
D Rs.54,864 as a current liability, and Rs.3,775 as a current asset
THE FOLLOWING INFORMATION RELATES TO QUESTIONS 71 AND 72
The total amount owed to Robert by his customers at 30 November 20X7 was Rs.78,600. Robert
has decided that a balance of Rs.600 should be written off as it is irrecoverable, and that, based on
past experience, an allowance equal to 172% of the remaining receivables balance should be
made. His receivables allowance at 1 December 20X6 was Rs.1,200.
71. Robert has made the entry in the receivables expense account to write off the irrecoverable
balance.
What other entry does he need to make?
A A debit entry in the sales account
B A credit entry in the sales account
C A debit entry in the receivables account
D A credit entry in the receivables account

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Commerce Department Baghdad Campus IUB

72. How should the movement in the receivables allowance be reflected in the income statement?
A A credit of Rs.21 B A charge of Rs.21
C A credit of Rs.30 D A charge of Rs.30
73. Leung makes an allowance for receivables on the basis of the length of time the debt has been Page | 16
outstanding. The analysis of receivables' balances at 30 May 20X2, and the related allowance is:
Balances at 30.11.XI
Length of time debt has been outstanding Allowance required Rs.
Less than 30 days Nil 70,866
30 days to 59 days 10% of balances 25,250
60 days and over 50% of balances 10,808
What should the allowance for receivables be?
A Rs.2,525 B Rs.5,404
C Rs.7,929 D Rs.10,808
74. Colin allows for potential irrecoverable debts on the basis of the length of time the debt has been
outstanding. The aged receivables analysis at 30 September 20X3 and the allowances required
are:
Age of debt Rs. Allowance required
0-30 days 56,800 1% of balances
31-59 days 37,700 20% of balances
60 days and over 14,900 75% of balances

At 1 October 20X2, Colin's allowance for receivables was Rs.18,765.

Which of the following should be reported in Colin's income statement for the year to 30
September 20X3?
A A charge of Rs.518 B A credit of Rs.518
C A charge of Rs.19,283 D A credit of Rs.19,283
75. At 30 November 20X6 the balance on Claire's receivables ledger is Rs.37,890. Clare has decided
to write off balances totaling Rs.1,570. She has also calculated that an allowance equivalent to
2.5% of the remaining balances is required.
What value of receivables should be reported in Claire's statement of financial position at 30
November 20X6?
A Rs.35,642 B Rs.35,412
C Rs.36,400 D Rs.37,142
76. What general ledger entries are required to write off an irrecoverable balance due from a
customer?
A Debit Sales
Credit Receivables expense
B Debit Receivables expense
Credit Sales
C Debit Receivables expense
Credit Trade receivables control
D Debit Trade receivables control
Credit Receivables expense

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77. Shirley wishes to write off an irrecoverable receivables balance. She has made the correct entry in
the receivables expense account.
What entry is needed to complete the double entry?
A Debit receivables B Credit receivables
Page | 17
C Debit receivables allowance D Credit receivables allowance
78. In September 20X1, Dora wrote off an amount of Rs.120 due from a customer who had become
bankrupt. However, in January 20X2, she unexpectedly received half of the amount due from that
customer. Dora prepares her accounts to 31 December each year.
How should Dora account for this amount?
A As an accrual for Rs.60
B As sundry income of Rs.60 in the income statement
C As a new receivable of Rs.60
D As a prepayment of Rs.60
79. By setting up an allowance for receivables, what accounting principle is being applied?
A Accruals B Prudence
C Going concern D Materiality
80.80. A decrease in the allowance for receivables would result in
A An increase in liabilities B A decrease in working capital
C A decrease in net profit D An increase in net profit
81. A company has been notified that a receivable has been declared bankrupt. The company had
previously provided for this doubtful debt. Which of the following is the correct double entry?
DR CR
A Bad debts account The receivable
B The receivable Bad debt account
C Allowance for receivables The receivable
D The receivable Allowance for receivables
82. An increase in an allowance for receivables has been treated as a reduction in the financial
statements. The amount is Rs.8,000. Which of the following explains the resulting effects?
A Net profit is overstated by Rs.16,000, receivables overstated by Rs.8,000
B Net profit understated by Rs.16,000, receivables understated by Rs.16,000
C Net profit overstated by Rs.16,000, receivables overstated by Rs.16,000
D Gross profit overstated by Rs.16,000, receivables overstated by Rs.16,000
83. At 1 January 20X1, there was an allowance for receivables of Rs.3,000. During the year, Rs.1,000
of debts was written off, and Rs.800 of bad debts was recovered. At 31 December 20X1, it was
decided to adjust the allowance for receivables to 5% of receivables which are Rs.20,000.
What is the total bad debt expense for the year?
A Rs.200 debit B Rs.1,800 debit
C Rs.2,200 debit D Rs.1,800 credit

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Commerce Department Baghdad Campus IUB

84. At the beginning of the year, allowance for receivables was Rs.1,000. At the end of the year when
receivables were Rs.18,500, a specific allowance was made for the whole of Bert's debt of Rs.500
and for 80% of Fred's debt of Rs.1,000. It was decided to make a general allowance of 2% of
remaining debts.
What was the closing balance on the allowance for receivables account? Page | 18
A Rs.640 B Rs.1,640
C Rs.1,644 D Rs.2,640
85.85. Allowances for receivables are an example of which accounting concept?
A Accruals B Consistency
C Matching D Prudence
86. At the beginning of the year, the allowance for receivables was Rs.850. At the year-end, the
allowances required was Rs.1,000. During the year Rs.500 of debts were written off, which
includes Rs.100 previously included in the allowance for receivables.

What is the charge to income statement for bad debts and allowance for receivables for the year?
A Rs.1,500 B Rs.1,000
C Rs.650 D Rs.550
87. A decrease in the allowance for receivables would result in
(a) An increase in liabilities (b) A decrease in working capital
(c) A decrease in net profit (d) An increase in net profit
88. A company has been notified that a receivable has been declared bankrupt. The company had
previously provided for this doubtful debt. Which of the following is the correct double entry?
Dr Cr
(a) Bad debts account The receivable
(b) The receivable Bad debt account
(c) Allowance for receivables The receivable
(d) The receivable Allowance for receivables
89. An increase in an allowance for receivables has been treated as a reduction in the financial
statements. The amount is Rs. 8,000. Which of the following explains the resulting effects?
(a) Net profit is overstated by Rs. 16,000, receivables overstated by Rs. 8,000
(b) Net profit understated by Rs. 16,000, receivables understated by Rs. 16,000
(c) Net profit overstated by Rs. 16,000, receivables overstated by Rs. 16,000
(d) Gross profit overstated by Rs. 16,000, receivables overstated by Rs. 16,000
90. At 1st January 2011, there was an allowance for receivables of Rs. 3,000. During the year,
Rs. 1,000 of debts was written off, and Rs. 800 of bad debts was recovered. At 31s' December
2011, it was decided to adjust the allowance for receivable to 5% of receivables which are
Rs. 20,000.
(a) Rs. 200 debit (b) Rs. 1,800 debit
(c) Rs. 2,200 debit (d) Rs. 1,800 credit

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91. At the beginning of the year, allowance for receivables was Rs. 1,000. At the end of the year
when receivables were Rs. 18,500, a specific allowance was made for the whole of Bert‟s debt of
Rs. 500 and for 80% of Fred‟s debt of Rs. 1,000. It was decided to make a general allowance of
20% of remaining debts.
What was the closing balance on the allowance for receivables account? Page | 19
(a) Rs. 640 (b) Rs. 1,640
(c) Rs. 1,644 (d) Rs. 2,640
92. Allowances for receivables are an example of which accounting concept?
(a) Accruals (b) Consistency
(c) Matching (d) Prudence
93. At the beginning of the year, the allowance for receivables was Rs. 850 At the year-end, the
allowances required was Rs. 1,000. During the year Rs. 500 of debts were written off, which
includes Rs. 100 previously included in the allowance for receivables
What is the charge to income statement for bad debts and allowance for receivables for the year?
(a) Rs. 1,500 (b) Rs. 1,000
(c) Rs. 650 (d) Rs. 550
94. A debt that we will not be able to collect:
(a) Good debts (b) Normal debts
(c) Bad debts (d) All of the above
95. An account showing the expected amounts of debtors at the balance sheet date who will not be
able to pay their accounts:
(a) Provision for simple debts (b) Provision for depreciation
(c) Provision for goods debts (d) Provision for doubtful debts
96. Provision for bad debts is made to:
(a) Avoid having a bad debt.
(b) Get the debtors to pay more quickly.
(c) Keep the amount of debtors approximately at the same value each year.
(d) Obtain true and fair value of debtors for the balance sheet.
97. Allowance for receivables (Bad debts) is an example of which accounting concept?
(a) Matching (b) Prudence
(c) Accruals (d) Consistency
98. An allowance for receivable account is a(n):
(a) Expenses account (b) Asset account
(c) Income account (d) Contra account
99.99. When preparing financial statements, the bad debts account is 'closed' by a transfer to...!
(a) The balance sheet (b) The profit and loss account
(c) The trading account (d) The provision for bad debts account
100.100.An increase in a provision will have a:
(a) Credit in the profit and loss account (b) Debit in the profit and loss account
(c) Debit in the assets account (d) Provision for depreciation
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101. If allowance for receivable is increased, what is its effect on income statement?
(a) Reduction in expenses (b) Increase in expenses
(c) Increase in profit (d) No effect on income statement
102. If the Debtor's Ledger has a debit balance of Rs. 39,400 it means that Page | 20
(a) There is Rs.39.400 in the bank account
(b) Customers owe to the business Rs. 39,400
(c) Business owes to creditors Rs. 39,400
(d) None of the above
103. Making a provision for doubtful debts in anticipation of actual bad debts is on the basis of:
(a) Convention of disclosure (b) Convention of materiality
(c) Convention of conservatism (d) All of the above
104. An irrecoverable debt which has been written off in previous year recovers in current period is
taken as:
(a) Increase in expenses of current year (b) Decrease in expenses of current year
(c) Other income of current year (d) Not shown in current year records.
105. A company has been notified that a debtor (account receivable) has been declared bankrupt.
Which of the following is the correct double entry to write off account receivable of this
customer?
Debit Credit
(a) irrecoverable debt Account receivable expense
(b) Account receivable Irrecoverable debt expense
(c) Allowance for receivable Irrecoverable debt expense
(d) Account receivable Allowance for receivable
106. Which of the following would a decrease in the allowance for receivables result in?
(a) V (b) A decrease in working capital
(c) An increase in net profit (d) An increase in net profit
107. At January 1, 2011 the balance in allowance for receivables showed Rs.15,000. At the end of the
year it is decided to write off Rs. 8,000 and adjust allowance for receivable to Rs.18,000.
What will be the effect of this decision an profit for the year?
(a) Decreases by Rs. 8,000 (b) Decreases by Rs. 18,000
(c) Increases by Rs. 8,000 (d) Decreases by Rs. 11,000
108.108.Debts that we are unable to collect to the customer's account and:
(a) Credited to a bad debts account (b) Debited to a bad debts account
(c) Debited to debtors account (d) Credited to suppliers account
109.109.Which of the following is the reason of irrecoverable debt
(a) Sales invoice is not yet sent to customer
(b) Sales invoice is not prepared properly property
(c) The amount is not yet due from customers
(d) The customer is declared bankrupt

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110. A customer, who was unable to pay the debt owned to the business, gave an electronic diary. The
owner of the business accepted it to cancel the debt, but he gave this diary to his son as birthday
present.
What is the double entry for the above transaction?
Page | 21
Account to be debited Account to be credited
(a) Electronic Diary Accounts Receivable
(b) Accounts Receivable Electronic Diary
(c) Drawings Electronic Diary
(d) Drawings Accounts Receivable
111. At December 31, 2012 a company's receivable totaled Rs. 600,000 and an allowance for
receivable of Rs. 60,000 had been brought down from the year ended December 31, 2011. It was
decided to write off debts totaling Rs. 25,000 and to adjust allowance for receivable @10% of the
receivable.
What charge for bad and doubtful debts should appear in the company's income statement for the
year ended December 31, 2012?
(a) Rs.25,000 (b) Rs. 22,500
(c) Rs. 35,000 (d) Rs. 57,500
112. If allowance for receivable is decreased, what is its effect on income statement?
(a) Reduction in expenses (b) Increase in expenses
(c) Decrease in profit (d) No effect on income statement
113. These are needed otherwise the value of the debtors on the balance sheet will be showing too high
a value, and could mislead anyone looking at the balance sheet. Also this allows for more
accurate calculation of profit of profit and loss:
(a) Provision for bad debts (b) Provision for good debts
(c) Provision for simple debts (d) Provision for depreciation
114. The controlling account in the general ledger that summarizes the debits and credits to the
individual customers.
(a) Accounts Payable (b) Accounts Receivable
(c) Sales (d) Purchases
115. At January 1, 2011 the balance in allowance for receivables showed Rs. 28,000. At the end of the
year it is decided to write off Rs.16,000 and adjust allowance for receivable to Rs.25,000.
What will be the effect of this decision on profit for the year?
(a) Decreases by Rs. 16,000 (b) Decreases by Rs. 13,000
(c) Increases by Rs. 13,000 (d) Decreases by Rs. 25,000
116. At 1 July 2010 a limited liability company had an allowance for receivables of Rs. 83,000.
During the year ended 30 June 2011 debts totaling Rs. 146,000 were written off. At 30 June 2011
it was decided that a receivables allowance of Rs. 218,000 was required.
What figure should appear in the company's statement of comprehensive income statement for the
year ended 30 June 2011 for receivable/bad debts expenses?
(a) Rs. 11,000 (b) Rs.364,000
(c) Rs. 155,000 (d) Rs 231.000

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Commerce Department Baghdad Campus IUB

117. An increase in the allowance for receivable results in:

(a) A decrease in current liabilities (b) An increase in net profit
(c) A reduction in cash flows (d) A decrease in net current assets
118. Which TWO of the following statements are correct? Page | 22
1. Credit limits are applied to customers who purchase goods using cash only.
2. Receivables are included in the statement of financial position net of the receivable
allowance
3. An aged receivables analysis shows how long invoices for each customer have been
outstanding.
4. A credit limit is a tool applied by the credit control department to make suppliers provide
goods on time.
(a) 1 and 2 (b) 1 and 3
(c) 2 and 3 (d) 3 and 4
119. The controlling account in the general ledger that summarizes the debits and credits to the
individual customers.
(a) Accounts Payable (b) Accounts Receivable
(c) Sales (d) Purchases
120. At 30 September 2011, a company's allowance for receivables amounted to Rs. 38,000, which
was five per cent of the receivables at that date.
At 30 September 2012, receivables totalled Rs. 868,000. It was decided to write off Rs. 28,500 of
debts as irrecoverable and to keep the allowance for receivables at five per cent of receivables.
What should be the charge in the statement of comprehensive income for the year ended 30
September 2012 for receivable/bad debts expense?
(a) Rs. 28,500 (b) Rs. 32,500
(c) Rs. 38,000 (d) Rs.43,425
121. At January 01, 2007 the allowance for receivable of Bilal was Rs. 67,000. During the year ended
December 31, 2007 debts totaling Rs. 27,000 was written off. It was decided that the allowance
for receivable should be Rs. 70,000 as at December 31, 2007.
What amount should appear in Bilal's income statement for irrecoverable debt?
(a) Rs. 27,000 (b) Rs. 30,000
(c) Rs. 97,000 (d) Rs. 70.000
122. At the beginning of the year, the allowance for receivables was Rs. 850. at the year end. the
allowance required was Rs. 1,000. During the year Rs. 500 of debts were written off, which
includes Rs. 100 previously included in the allowance for receivables.
What is the charge to income statement for receivables expenses for the year?
(a) Rs. 560 (b) Rs. 1,500
(c) Rs. 1,000 (d) Rs. 550
123. Relative to not having a provision for bad or doubtful debts, the existence of such a provision
(a) Increase the total of current liabilities (b) Reduces the cost of sales
(c) Reduces the total of current assets (d) None of the above

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124. A business writes oil bad debts through provision account at the end of the financial year. The
entries regarding bad debts write-off would be:
(a) Dr. Bad Debt Expense Cr. Provision for Bad Debt
(b) Dr. Sundry Debtors Cr. Bad Debt Expense
Page | 23
(c) Dr. Provision for Bad Cr. Sundry Debt
(d) None of the above
125. A credit balance on Mr. Munir's account in a firm's debtors ledger means that
(a) The amount owed by Mr. Munir is a bad debt
(b) One or more of Mr. Munir‟s cheques has bounced'
(c) The firm owes money to Munir.
(d) A provision should be made specifically against Munir‟s account.
126. At 1 July, 2011, the allowance for bad debts of Moiz was Rs. 18,000. During the year ended 30
June 2012 debts totaling Rs. 14,600 were written off. It was decided that the allowance for bad
debts should be Rs. 16,000 as at 30 June 2012.
What amount should appear in Moiz‟s statement of comprehensive income for bad debts
expenses for the year ended 30 June 2012?
(a) Rs. 28,800 (b) Rs.14,600
(c) Rs. 12,600 (d) Rs. 16,600
127. At 1 January, 2011, a company‟s allowance for receivable was Rs. 40,000
At December 31, 2011, the trade receivable amounted to Rs. 600,000. It was decided to write off
Rs. 30,000 of these debts and adjust allowance for receivable @ 2% of remaining trade
receivables.
What amount should appear in company's statement of comprehensive income for irrecoverable
debt? Rs 1,400
(a) Rs. 1,400 (b) Rs. 3,000
(c) Rs. 5,000 (d) Rs. 2,000
128. Provision for bad debts appears on the balance sheet as:
(a) A fictitious asset (b) A part of Share Capital
(b) A deduction from debtors (d) None of the above
129. At September 30, 2011 a company's allowance for receivables amounted Rs. 26,000 which was
5% of trade receivable at that date.
At September 30, 2011 trade receivable amounted to Rs. 600,000. It was decided to write off Rs.
12,000 of debts as bad and to keep the allowance for receivable at 5% of trade receivable.
What should be the charge in the income statement for the year ended 30 September 2011 for
irrecoverable debts?
(a) Rs. 29,400 (b) Rs. 14,000
(c) Rs. 15,400 (d) Rs. 16,000

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130. At 31 December 2011 a company's receivables totalled Rs. 400,000 and an allowance for
receivables of Rs. 50,000 had been brought forward from the year ended 31 December 2010.
It was decided to write off debts totaling Rs. 38,000 and to adjust the allowance for receivables to
10% of the receivables.
Page | 24
What charge for receivables expense should appear in the company's statement of comprehensive
income for the year ended 31 December 20117
(a) Rs. 36,200 (b) Rs. 24,200
(c) Rs. 38,000 (d) Rs. 40,000
131. At 1 January, 2011, the allowance for bad debts of Bilal was Rs. 80,000. During the year ended
December 31, 2011 debts totaling Rs. 90,000 was written off. It was decided that the allowance
for bad debts should be Rs. 30,000 as at December 31, 2011.
What amount should appear in Moiz's statement of comprehensive income for bad debts expenses
for the year ended 30 June 2012?
(a) Rs. 20,000 (b) Rs. 90,000
(c) Rs. 30,000 (d) Rs. 40,000
132. At 1 January 2011, there was an allowance for bad debts of Rs. 3,000. During the year, Rs. 1,000
of debts were written off as irrecoverable, and Rs. 800 of debts previously written off were
recovered. At 31 December 2011, it was decided to adjust the allowance for bad debts to 5% of
receivables which are Rs. 20,000.
What will be the entry to record above situation at the year end?
(a) Dr Allowance for Bad Debts Rs. 1,800
Cr. Income statement Rs.1.800
(b) Of. Income statement Rs. 1,800
Cr. Allowance for bad debts Rs. 1,800
(c) Dr. Bad Debts expenses 17,200
Cr. Income statement Rs. 17,200
(d) Dr. Income statement Rs. 17,200
Cr. Bad Debts expenses 17,200
133. The decrease in allowance for receivable during the year is:
(a) Added to account receivable in Statement of Financial Position.
(b) Deducted from account receivable in Statement of Financial Position.
(c) Added to total bad and doubtful debt expense in income statement.
(d) Deducted from total bad and doubtful debt expense in income statement.
134. At the time of drawing a bill, the drawer credits:
(a) There is Rs. 39,400 in the bank account
(b) Customers owe to the business Rs. 39,400
(c) Business owes to creditors Rs. 39,400
(d) None of the above

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135. At January 1, 2010 the allowance for receivable of Shazia was Rs. 35,000.
During the year ended December 31, 2010 .debts totaling Rs. 15,000 was written off. It was
decided that the allowance for receivable should be Rs. 30,000 as at December 31, 2010. What
amount should appear in Income statement of Shazia for bad debts and doubtful debt?
Page | 25
(a) Rs. 30,000 (b) Rs. 45,000
(c) Rs. 15,000 (d) Rs. 10.000
136. At 31 May 2007, Rafay‟s, Trial balance included the following items:
Rs.
Inventory at 1 June 2006 23,851
Trade receivables 5,574
Trade payables 3,216
Bank overdraft 5,851
Loan due for repayment in 2009 15,001
What is the value of Rafay's current liabilities at 31 May 2007?
(a) Rs. 75,597 (b) Rs. 38,020
(c) Rs. 61,597 (d) Rs. 53,020
137. The opening balance of on Rafay's Allowance for doubtful debts account was Rs. 4,000. Rafay
wrote off Rs. 7,000 of bad debts during the year.
The closing balance on the allowance for doubtful debts account was Rs.5,000.
What is the total charge to Rafay‟s income statement in respect of bad and doubtful debts for the
year?
(a) Rs. 8,000 (b) Rs. 4,000
(c) Rs. 5,000 (d) Rs. 7,000
138. Modern Traders uses the percentage of sales method to estimate un-collectible. Net credit sales
for the current year amount to Rs. 1,000,000, and management estimates that 3% will be un-
collectible. An allowance for doubtful debts prior to adjustment has a debit balance of Rs. 1,900.
The amount of expense reported on the income statement.
(a) Rs. 30,000 (b) Rs. 31,900
(c) Rs. 28; 100 (d) Rs. 1,900
139. Which of the following is a disadvantage of allowing credit to customers?
1. Funds are stuck up in the receivable.
2. Risk of bad debt is there.
3. Management of account receivable is costly.
4. It increases sales of business.
(a) 1 Only (b) 1 and 2 Only
(c) 2. 3 and 4 Only (d) 1, 2 and 3 Only
140. The opening balance on Nimra's allowance for doubtful debts account was Rs. 9,000. Nimra
wrote off. Rs. 13,000 as bad debts during the year.
The closing balance on the allowances for doubtful debts account was Rs. 6,000.
What is the total charge to Nimra's income statement in respect of bad and doubtful debts for the
year?
(a) Rs. 9,000 (b) Rs. 13,000
(c) Rs. 10,000 (d) Rs. 22,000
From the desk of Jahanzaib Butt
Commerce Department Baghdad Campus IUB

141. At June 30, 2011, a company's allowance for receivable amounted to Rs. 30,000 which was 2%
of trade receivable at that date.
At June 30, 2012 trade receivable amounted to Rs. 300,000. It was decided to write off Rs.
28,000 of debts as irrecoverable and to keep the allowance for receivable at 2% of trade
receivable. Page | 26
What should be the charge in the Income statement for the year ended June 30 2012 for
irrecoverable debts?
(a) Rs. 5,440 (b) Rs. 3440
(c) Rs. 2,000 (d) Rs. 3,000
142. The increase in allowance for receivable during the year is:

(a) Added to account receivable in Statement of Financial Position.

(b) Deduction from account receivable in Statement of Financial Position.
(c) Added to total bad and doubtful debt expenses in income statement.
(d) Deducted from total bad and doubtful debt expenses in income statement.
143. At December 31, 2011, a company's allowance for receivable amounted to Rs. 55.000 which was
3% of trade receivable at that date.
At December 31. 2012 trade receivable amounted to Rs. 320,000. it was decided to write off Rs
60,000 of debts as bad and to keep the allowance for receivable at 3% of trade receivable.
What should be the charge in the Income Statement for the year ended At December 31.2012 for
bad and doubtful debts?
(a) Rs. 12,800 (b) Rs. 7,800
(c) Rs. 5,000 (d) Rs. 60,000
144. Bismillah Communication completed the following transactions during the year ended December
31, 2010.
Opening account receivable Rs. 40,000
Credit sales during the year Rs. 65,000
Collection during the year from customers Rs. 80,000
Account receivable written off during the year Rs. 1,000
What is the amount of receivable that should be shown in the Statement of Financial Position at
year end?
(a) Rs. 26,000 (b) Rs. 24,000
(c) Rs. 34,000 (d) Rs. 29,000
145. An enterprise started the year with total trade receivables of Rs. 110,000 and an allowance for
receivable of Rs.,5,000.
During the year, two specific debts were written off, one for Rs. 1,200 and the other for Rs.800. A
debt of Re. 1,500 that had been written off as irrecoverable in the previous year was recovered
during the year. At the year-end, total receivables were Rs. 130,000 and the allowance for
receivable was Rs. 6,800.
What is the charge in the income statement for the year in respect of irrecoverable
debts? (a) Rs. 2,500 (b) Rs. 2,300
(c) Rs. 2,700 (d) Rs. 2,900

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

146. Under which of the following concept of accounting, allowance for receivable is maintained by
the business?
(a) Historical cost concept (b) Materiality concept
(c) Prudence concept (d) Substance over form
Page | 27
147. The rationale for making a provision in respect of doubtful debts is that the provision....
(a) Is estimated of future bad debts
(b) Records the expense of bad debts as they are incurred.
(c) Matches the estimated cost of future bad debt against the revenue earned in giving rise to
the potential bad debts
(d) Records bad debts without taking them out of the books of an entity, this showing the full
amount owed by debtors as a current asset
148. At April 30, 2011, a company's allowance for receivable amounted to Rs. 20,000 which was 5%
of trade receivable at that date.
At April 30, 2012 trade receivable amounted to Rs. 250,000. It was decided to write off Rs.
24,000 of debts as bad and to keep the allowance for receivable at 5% of trade receivable.
What should be the charge in the income statement for the year ended April 30 20.12 for bad and
doubtful debts?
(a) Rs. 15,440 (b) Rs. 15:300
(c) Rs. 15,000 (d) Rs. 15,860
149. At January 1, 2010 a business had trade account receivable Rs. 90,000. During the year to
December 31 2010 the following transactions took place.
a Credit sales to customers Re. 280,000.
b. Collection from customers Rs. 170,000.
c. Two customers owing Rs. 10,000 and Rs. 5,000 are declared bankrupt These two
amounts are to be written off.
What is the amount of trade account receivable as at December 31, 2010 and the irrecoverable
debts expense for the year?
Trade Irrecoverable debt
Receivable expense
(a) Rs. 230,000 Rs. 15,000
(b) Rs. 185,000 Rs. 15,000
(c) Rs. 180,000 Rs. 10,000
(d) Rs. 150,000 Rs. 15,000
150. If company's allowance for bad debts shows amounting Rs. 30,000 at the beginning of the year
and at the end of the year trade receivable is amounting Re. 590,000. Rs. 20,000 was confirming
not recoverable and adjust allowance for bad debts @ 5% of remaining debts.
What figure should appear in the company's income statement for total debts written off and
movement of allowance for the year end?
(a) Rs. 20,000 (b) Rs. 22,000
(c) Rs. 21.000 (d) Rs. 18,500

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

151. At January 1, 2011 the balance in allowance for receivable showed Rs. 45,000. During the year it
is decided to write off account of Nadeem, a customer Rs. 15,000 and adjust allowance for
receivable to Rs. 40,000.
What is the impact of this decision on profit of year 2011?
Page | 28
(a) Decrease by Rs. 30,000 (b) Decrease by Rs. 10,000
(c) Increase by Rs. 10,000 (d) Increase by Rs. 30,000
152. Are kept separate from the bad debts account. The amount of the provision is on the basis of the
best guess that can be made taking all the facts into account:
(a) Provision for good debts (b) Provision for normal goods
(c) Provision for depreciation (d) Provision for bad debts
153. At December 31, 2011 a company's receivable totaled Rs. 750,000 and an allowance for doubtful
debts of Rs. 50,000 had been brought down from the year ended December 31, 2010.
It was decided to write off debts totaling Rs. 45,000 and to adjust allowance doe doubtful debts
@ 15% of the receivable.
What charge for bad debts should appear in the company's income statement for the year ended
December 31, 2011.
(a) Rs. 105,750 (b) Rs. 45,000
(c) Rs 100 750 (d) Rs 95 900
154. At January 1, 2011 the allowance for receivable of a company was Rs. 60,000. During the year
ended December 31, 2011 debts totaling Rs. 65,000 was written off. It was decided that the
allowance for receivable should be Rs. 20,000 as at December 31. 2011.
What amount should appear in Income statement of the company for the bad and doubtful
debts? (a) Rs. 25,000 (b) Rs. 20,000
(c) Rs. 65,000 (d) Rs. 60,000
155. On January 1, 2011 the balance on Ali's allowance for doubtful dents account was Rs. 24,000. Ali
decided to write off Rs. 14,000 of bad debts during the year.
The closing balance on the allowance for doubtful debts account was Rs. 30,000.
What is the total charge to Ali's income statement in respect of bad and doubtful debts for the
year?
(a) Rs. 20,000 (b) Rs. 14,000
(c) Rs. 24,000 (d) Rs. 30,000
156. During the year ended 31 December 2011, the sales revenue of Neha & Nimra Industries totaled
Rs. 800,000, its trade receivables amounting to 5% of revenue for the year.
Neha & Nimra Industries wishes to maintain its allowance for doubtful debts at 4% of trade
receivables, and discovers that the allowance as a result is 25% higher than it was a year before.
During the year specific bad debts of Rs. 4,000 were written off and bad debts (written off three
years previously) of Rs. 1,000 were recovered.
What is the net charge for irrecoverable debts for the year ended 31 December
2011? (a) Rs. 6,800 (b) Rs.
6,000
(c) Rs. 5,900 (d) Rs. 6,200

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

157. At July 01, 2011, a company's allowance for receivable was Rs. 75,000.
At June 30, 2012 trade receivable amounted to Rs. 550,000, it was decided to write off Rs. 85,000
of these debts and adjust the allowance for receivable to Rs.65,000.
What are the final amounts for inclusion in the company's Statement of Financial Position at June
Page | 29
30 2012.
Allowance for
Trade Receivable Net Receivable
receivable
(a) Rs.550,000 Rs. 65,000 Rs. 485,000
(b) Rs. 550,000 Rs. 85,000 Rs. 465,000
(c) Rs. 465,000 Rs.85.000 Rs. 380,000
(d) Rs. 465,000 Rs. 65,000 Rs. 400,000

158. Debts that we are unable to collect are credited to the customer's account and:
(a) Credited to a bad debts account (b) Debited to a bad debts account
(c) Debited to debtors account (d) Credited to suppliers account
159. A business started the year with total trade receivables of Rs. 150,000 and an allowance for
recoverable of Rs. 8,000.
During the year, two specific debts were written off, one for Rs. 2,800 and the other for Rs.
2,200. A debt of Rs. 4,800 that had been written off as irrecoverable in the previous year was
recovered during the year. At the year-end, total receivables were Rs. 70,000 and the allowance
for receivable was Rs.4,000.
What is the charge debit or credit in the income statement for the year in respect of irrecoverable
debts?
(a) Rs. 3,800 Debit (b) Rs. 2,300 Credit
(c) Rs. 3,800 Credit (d) Rs. 2,300 Debit
160. At October 01, 2010, a company's allowance for receivable was Rs. 95,000. At September 30,
2011 trade receivable amounted to Rs. 690,000. it was decided to write off Rs. 88,000 of these
debts and adjust the allowance for receivable to Rs. 70 000
What are the final amounts for inclusion in the company's Statement of Financial Position at
September 30 2011.
Allowance for
Trade Receivable Net Receivable
receivable
(a) Rs.602,000 Rs. 95,000 Rs. 507,000
(b) Rs. 690,000 Rs. 70,000 Rs. 620,000
(c) Rs. 602,000 Rs.70.000 Rs. 532,000
(d) Rs. 602,000 Rs. 88,000 Rs. 514,000
161. At July 1, 2011, a business had trade account receivable Rs. 70,000. During the year to June 30
2012 the following transactions took place.
a. Credit sales to customers Rs. 150,000
b. Collection from customers Rs. 100,000
c Two customers owing Rs. 5,000 and Rs. 3,000 are declared bankrupt These two amounts
are to be written off
What is the amount of trade account receivable as at June 30, 2012 and the irrecoverable debt
expenses for the year

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

Trade Irrecoverable
receivables debt expenses
(a) Rs. 120, 000 Rs. 5,000
(b) Rs. 160,000 Rs. 3,000
(c) Rs. 200,000 Rs. 8,000 Page | 30
(d) Rs. 112,000 Rs. 8,000
162. At 31 December 2012, a company‟s trade receivables totalled Rs. 864,000 and the allowance for
receivables was Rs. 48,000. It was decided that debts totaling Rs. 13,000 were to be written off,
and the allowance for receivables adjusted to five per cent of the receivables.
What figures should appear in the statement of financial position for trade receivable (after
deducting the allowance) and in the statement of comprehensive income for receivables
expenses?
Statement of Statement of
Comprehensive Financial
Income Position
(a) Rs. 8,200 Rs. 807,800
(b) Rs. 7,550 Rs. 808,450
(c) Rs. 55,550 Rs. 808,450
(d) Rs. 15,450 Rs. 808,450
163. Provision for discount allowed on outstanding debtors balances should be calculated, at an
appropriate rate, on
(a) Total debtors net of any bad debts written off
(b) Total debtors before account is taken of bad debt
(c) Total debtors less total creditors
(d) Total debtors net of any bad debts written off and after deducting the cumulative amount
of any provision for doubtful debts.
164. The rationale for making a prevision in respect of doubtful debt is that the provision...

(a) Is an estimated of future bad debts

(b) Records the expense of bad debts as they are incurred
(c) Matches the estimated cost of future bad debts against the revenue earned in giving
rise to the potential bad debts.
(d) Records bad debts without taking them out of the „books‟ of an entity, thus showing
the full amount owed by debtors as a current asset
165. Relative to not having a provision for bad or doubtful debts, the existence of such a provisions....

(a) Increase the total of current liabilities

(b) Reduces the cost of sales
(c) Reduces the total of current assets
(d) None of the above
166. A credit balance on Mr. Murphy‟s account in a firm‟s debtors ledger means that

(a) The amount owed by Murphy is a bad debt

(b) One of more of Murphy‟s cheques has „bounced‟
(c) The firm owes money‟s Murphy
(d) A provision should be made specifically against Murphy‟s account

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

167. When preparing financial statements, the bad debts account is „closed‟ by a transfer to ..

(a) The balance sheet (b) The profit loss account

(c) The trading account (d) The provision for bad debts account
Page | 31
168. Provision for discount allowed on outstanding debtors balances should be calculated, at an
appropriate rate, on ..

(a) Total debtors net 21 or had debts written off

(b) Total debtors before account is taken of bad debts
(c) Total debtors less total creditors
(d) Total debtors net of any bad debts written off and after deducting the cumulative
amount of any provision for doubtful debts
169. A debt that we will not be able to collect:

(a) Good debts (b) Normal debts

(c) Bad debts (d) All of above
170. An account showing the expecte4d amounts of debtors at the balance sheet date who will not be
able to pay their accounts

(a) Provision for simple debts (b) Provision for depreciation

(c) Provision for goods debts (d) Provision for doubtful debts
171. Debts that we are unable to collect are credited to the customer‟s account and:
(a) Credited to a bad debts account (b) Debited to a bad debts account
(c) Debited to debtors account (d) Credited to suppliers account
172. These are needed otherwise the value of the debtors on the balance sheet will be showing too high
a value, and could mislead anyone looking at the balance sheet Also this allows for more accurate
calculation of profit and loss:
(a) Provisions for bad debts (b) Provisions for good debts
(c) Provisions for simple debts (d) Provision „or depredation
173. Are kept separate from the debts account The amount of the provision is on the bass of the best
guess that can be made taking all the facts into account
(a) Provision for good debts (b) Provision for normal goods
(c) Provision for depreciation (d) Provisions for bad debts
174. An increase in a provision will have a:
(a) Credit in the profit and loss account (b) Debit in the profit and loss account
(c) Debit in the asset account (d) Provision for depreciation
175. A reduction in a provision will have:

(a) A debit in the profit and loss-account.

(b) A credit in trading account
(c) A credit in the profit and loss account
(d) A debit in provision for depreciation

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

176. When a debt is founded to be bad, what should be done in account?

(a) It must be recorded a bad sale

(b) It must be recorded as no sale
(c) It must be recorded as bad debt Page | 32
(d) It must be recorded as provision for depreciation
177. For showing a correct figure in the balance sheet about debtors we use:

(a) Provision for doubtful debts

(b) Provision for depreciation
(c) Provision for asset
(d) Provision for debtors
178. Bad debts account is used only when:

(a) Debts are provided good

(b) Debts is proved bad an is written off
(c) Debts are not secured
(d) All of above
179. What is ageing?

(a) It is a list of supplier for credit purchase

(b) It is a matter of fact
(c) It is list of debtor with respect of expected payment schedule
(d) It is list of debtors which are bad
180. Accounting entry in Year in which the provision is first made will be:

(a) Credit profit and loss account with amount of provision and debit provision for
doubtful debt
(b) On entry
(c) Debit provision for depreciation
(d) Debit profit and loss account with amount of provision and credit provision for doubtful
debts
181. Accounting entry for increasing provision will be:

(a) Credit profit and loss and debit provision for doubtful debt
(b) Debit profit and loss and credit provision for doubtful debt
(c) Debit loss and credit profit
(d) All of above
182. Accounting entry for reducing provision will be

(a) Debit provision for doubtful debts and credit profit and loss account
(b) Debit provision for depreciation
(c) Credit provision for doubtful debts and debit profit and loss account
(d) None of above

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

183. When debts will be reinstating the accounting entry will be:

(a) Debtors credit and bad debts debit

(b) Debtor on sale
(c) Debtors debit and credit bad debts recovered Page | 33
(d) None of above
184. When cash or cheque is later received from the debtor in settlement of the account or part thereof
the accounting entry will be:

(a) Bank credit and debtors debit

(b) Cash or ban debit and debtor's credit
(c) Cash debit and purchase credit
(d) All of above
185. Provision for discount will be shown at:

(a) Trial balance

(b) Trading account
(c) Profit and loss and balance sheet
(d) Provision for depreciation
186 To write of a debt as bad the correct procedure is to:
Debit Credit
(a) Debtor bad debts
(b) Debtor provision for bad debts
(c) Bad debts debtor
(d) Provision for bad debts profit and loss
187. At the end of the financial year the entries regarding bad debts are:
Debit Credit
(a) Profit and loss bade debts
(b) Bad debts profit and loss
(c) Debtors provision for bad debts
(d) Provision for bad debts profit and loss appropriation
188. Firms make provisions for bad debts in order to:

(a) Avoid having any bad debts

(b) Get their debtors to pay more quickly
(c) Keep the debtors figure approximately the same value each year
(d) Obtain a true and fair debtors figure for the balance sheet

189. Provisions for bad debts should appear on the balance sheet as:

(a) A fictitious asset

(b) Part of the share capital
(c) A deduction from the debtors
(d) An addition to the goodwill

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

190. To make a provision for bad debts the correct procedure is to

Debit Credit
(a) Provision for bad debts account bed debts account
(b) Debtors account provision for bad debts account
(c) Provision for bad debits account Profit and loss account Page | 34
(d) Profit and loss account provision for boa debts account
191. Which one of the following statements is INCORRECT From the information on given in the
accounts we known

(a) How many debts were written off dung the year as bad
(b) Whether the provision for bad debts was increased or decrease
(c) The balance on the debtors account at the end of the year
(d) The effect the bad debts have had on the profit for the year
192. Which one of the following statements about debtors, bad debts and provisions for bad debts in
incorrect?

(a) Debtors usually appear as a current asset in the balance sheet

(b) Provisions for bad debts usually have a debit balance in the ledger
(c) The bad debts account usually has a debit balance in the ledger
(d) An increase in the provision for bad debts account will reduce the profit of the form
193. Which am of the following types of business is likely to have the largest amount of book debts?

(a) A Chinese take away (b) A newsagent

(c) A bank (d) A supermarket
194. When a provision is created for the first time, double entry done would be:

(a) Debit trading and credit sale account

(b) Debit bank and credit purchase account
(c) Debit debtors and bank account
(d) Debit profit and loss and credit provision
195. At the end of a certain year the debtor of a firm amounted to Rs.5,000 and actual bad debts
written off were Rs.500 knowing this, what would be an appropriate percentage by which
provision for bad debts should be made?

(a) 2% (b) 4%
(c) 5% (d) 10%
196. To reduce a provision amount made for bad debts, one should:
Debit Credit
(a) Profit and loss bad debts provision
(b) Profit and loss debtors
(c) Sales debtors
(d) Bad debts provision profit and loss

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

197. When a provision for discount received is created for the first time, the double entry would be:
Debit Credit
(a) Profit and loss appropriate provision
(b) Appropriate provision profit and loss
(c) Creditors profit and loss Page | 35
(d) Profit and loss creditors
198. Sabeen wants to create a provision for purchase discount of 2.5% on creditors of 3,000. What
would be the double entry?
Debit Credit
(a) Prov for purchase discount creditor
(b) Creditors provision for purchase discount
(c) Prov for purchase discount purchase discount
(d) Discount received prove for purchase discount
199. At the beginning of the year a company has a provision for doubtful debts of 1,000 at the end of
year required provision is 2,500, during the year debts of 1,500 written off and 100 is received in
respect of a deal written oft many years ago. What is the net amount charged to the profit and loss
account for bad and doubtful debts?

(a) 1,500 Rs. (b) 2,500 Rs.

(c) 2,900 Rs. (d) 3,000 Rs.
200. Provision for discount on debtors is calculated on the amount of debtors:

(a) Before deducting the provision for doubtful debts

(b) Before deducting the actual bad debts and the provision for doubtful debts
(c) After deducting the actual bad debts but before the provision for doubtful debts
(d) After deducting both actual bad debts and provision for doubtful debts
201. Debtors at year-end were 80,000 Rs., bad debts written off during the year were 1,500 Rs. and
bad debts to be written off Rs. 1,000. Provision for doubtful debts is required 3% of debtors with
an existing provision of Rs. 1,800. Compute the amount to be charged in current year profit and
loss account:

(a) 2,500 (b) 3,025

(c) 3,070 (d) 3,100
202. The provision for bad debts is made by crediting…..

(a) Profit and loss account (b) Debtors account

(c) Provision for depreciation (d) Provision for depreciation
203. Provision for doubtful debts account is opened in…..

(a) Debtors ledger (b) General ledger

(c) Creditros ledger (d) Sale ledger

From the desk of Jahanzaib Butt

Commerce Department Baghdad Campus IUB

Page | 36

From the desk of Jahanzaib Butt