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WAEC Financial Accounting 1997 Question 27

Question 27

Bad Debts and Provisions

A provision is

  1. A.an expense of business to be paid for in cash
  2. B.an amount of loss from trading activities
  3. C.a loss in value of all business assets
  4. D.an expense the amount of which is not certain
  5. E.an amount set out of profit for other uses.
Show the answer and explanation

Answer: D (an expense the amount of which is not certain)

Explanation

A provision is set aside for a known liability or loss whose exact amount cannot be measured precisely, e.g. bad debts.