Tag: accountancy

Questions Related to accountancy

Give journal entry for:

Bad debts debited to profit and loss account.

accountancy provisions and reserves reserves provisions provision and reserves

  1. Profit & Loss A/c Dr.

    To Bad debts A/c

  2. Profit and Loss A/c Dr.

    To Provision for doubtful debts A/c

  3. Bad debts A/c Dr.

    To Sundry debtors A/c

  4. None of the above

Show answer
Correct Option: A
Explanation:

Amount which is not recoverable from the debtors is called bad debts. Bad debts is a loss for the organization and should be debited to profit & loss account. Following journal entry will be passed:


Profit & Loss A/c                                Dr.
            To Bad Debts A/c

Objective of provision is ____________.

accountancy provisions and reserves reserves provisions provision and reserves

  1. To make more profit

  2. To ascertain incomes/gains

  3. To ascertain the correct profit

  4. All of the above

Show answer
Correct Option: C
Explanation:

Provisions are created against the anticipated losses or for the expenses which are due but not paid. 

Objective of provision is to ascertain the true and correct profit by taking into consideration the probable losses for which exact amount cannot be ascertained.

_________ is made to know liability or expense pertaining to current accounting period.

accountancy provisions and reserves reserves provisions provision and reserves

  1. Provision

  2. Reserve

  3. Appropriation

  4. None

Show answer
Correct Option: A
Explanation:

The term provision refers to any of the following amounts :

1. The amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets; or
2. The amount retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy.

Provision is created to cover a loss in the value of assets, or a loss or expenses, the amount of which cannot be determined with substantial accuracy.

___________ are those debtors who may pay but business firm isi not sure about the collection of full amount from them.

accountancy provisions and reserves reserves provisions provision and reserves

  1. Good Debts

  2. Bad Debts

  3. Doubtful Debts

  4. None

Show answer
Correct Option: C
Explanation:

Option C is correct. A debtor is a person that owes money to business due to sale of goods or services on credit. Doubtful debts are those debtors that might become a bad debt in future. 

Business is not sure about the collection of amount. In this case, a reserve is created known as reserve for doubtful debts.

__________ are those debtors from where collection of money is not possible and amount given as a credit is certain loss.

accountancy provisions and reserves reserves provisions provision and reserves

  1. Good Debts

  2. Bad Debts

  3. Doubtful Debts

  4. None

Show answer
Correct Option: B
Explanation:

Bad Debt is a debt which is not collectible and is worthless to the Creditor. It is usually a product of the debtor which has gone for bankruptcy. Bad Debts can also occur when the collection cost is more than the amount of the debt.

_______ is shown either by way of a deduction from particular asset for which it is created.

accountancy provisions and reserves reserves provisions provision and reserves

  1. Provision

  2. Appropriations

  3. Reserve

  4. None

Show answer
Correct Option: A
Explanation:

Provision is shown either on assets side by way of deduction from the respective asset in relation to which it has been created or on the liabilities side under the sub-head 'Provisions'

Sundry Debtors closing balance Rs. 20000 , Further Bad debts Rs. 1000 , Provision for Bad Debts 5% , Ascertain the amount of Provision______.

accountancy provisions and reserves reserves provisions provision and reserves

  1. 1900

  2. 800

  3. 850

  4. 950

Show answer
Correct Option: D
Explanation:

Solution to the given problem is as under:


Sundry Debtors                                                  Rs.20000
Less: Further Bad Debts                                    Rs. 1000
                                                                           -----------------
Net Debtors                                                       Rs.19000

Provision for Bad Debts @ 5%  on Rs.19000   Rs.950.

Sales Rs. 50000, Cost of Goods Sold Rs. 30000, operating expenses Rs. 10000
Provision for tax @10% . calculate the provision for tax________.

accountancy provisions and reserves reserves provisions provision and reserves

  1. 1000

  2. 1500

  3. 1200

  4. 1100

Show answer
Correct Option: A
Explanation:

Solution to the given problem is given below:


Sales                                                             Rs.50000
Less: Cost of Goods Sold                            Rs.30000
                                                                     -----------------
Gross Profit                                                  Rs.20000
Less:Operating Expenses                           Rs.10000
                                                                     -----------------
Profit before Tax                                          Rs.10000
Provision for Tax @10%                               Rs. 1000

__________ are those from where collection of debt is certain.

accountancy provisions and reserves reserves provisions provision and reserves

  1. Good Debts

  2. Bad debts

  3. Doubtful Debts

  4. None

Show answer
Correct Option: A
Explanation:

Option A is correct one.

Anyone having borrowed money or goods from another owes a debt and is under obligation its certain to return the goods or repay the money, usually with interest.

A decrease in the provision for doubtful debts would result in ______________.

accountancy provisions and reserves reserves provisions provision and reserves

  1. an increase in liabilities

  2. a decrease in working capital

  3. a decrease in net profit

  4. an increase in net profit

Show answer
Correct Option: D
Explanation:

Provision for Doubtful Debts means the expense reported on the income statement or profit and loss A/c. If Provision for Doubtful Debts is the current period expense associated with the losses from normal credit sales, it will appear as an operating expense usually as part of Selling, General and Administrative Expenses (SG&A). If a provision for doubtful debts would decrease then debit balance of profit and loss A/c would decrease and ultimately net profit would increase.