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WAEC Financial Accounting 2003 Question 31

Question 31

Bad Debts and Provisions

The opening balance of debtors is N100,000 and that of provision for doubtful debts is N1,000. If provision is to be at 2½% of debtors, how much would be charged in the Profit and Loss Account?

  1. A.N3,500
  2. B.N2,500
  3. C.N1,500
  4. D.N1,000
Show the answer and explanation

Answer: C (N1,500)

Explanation

New provision 2½% × 100,000 = 2,500; increase = 2,500 − 1,000 = N1,500.