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WAEC Financial Accounting 1996 Question 50

Question 50

Bad Debts and Provisions

Provision for bad debts: N1,000 Cr
Bad debts: N500 Dr
Debtors: N50,000 Dr
Additional bad debts to be written off: N500
New provision for bad debts to stand at 5% of debtors.
The total amount of bad debts to be charged as expense in the Profit and Loss Account is

  1. A.N2,500
  2. B.N2,000
  3. C.N1,500
  4. D.N1,425
  5. E.N1,000.
Show the answer and explanation

Answer: E (N1,000.)

Explanation

Bad debts = N500 already in the books + N500 additional = N1,000 (the change in provision is shown separately).