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WAEC Financial Accounting 2010 Question 16

Question 16

Bad Debts and Provisions

Use the following information to answer questions 15 and 16.
1/1/06 Debtors: D2,600
1/1/06 Provision for bad debts: D60
31/12/06 Bad debts: D60
31/12/06 New provision for bad debts: 5% on debtors

The provision for bad debts in the profit and loss account is

  1. A.D187
  2. B.D127
  3. C.D67
  4. D.60
Show the answer and explanation

Answer: C (D67)

Explanation

Only the increase in the provision is charged: new provision D127 − old provision D60 = D67.