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WAEC Financial Accounting 1994 Question 1

Question 1

Bad Debts and Provisions

Which of the following statements is not valid?

  1. A.Provision for bad debts is deducted from debtors total in the Balance Sheet
  2. B.An increase in provision for bad debts appears on the debit side of the Profit and Loss Account
  3. C.A decrease in the provision for bad debts appears on the credit side of Profit and Loss Account
  4. D.The bad debt account is closed to the debit side of the Profit and Loss Account
  5. E.Bad debt is a deduction from debtors total after making provision for bad and doubtful debts.
Show the answer and explanation

Answer: E (Bad debt is a deduction from debtors total after making provision for bad and doubtful debts.)

Explanation

Bad debts are written off the debtors before the provision is worked out, not after.