Ali's trade receivables at 31 December 2019 were $26500. He knew that $400 of these were irrecoverable.
He wished to maintain a provision for doubtful debts equal to 5% of the trade receivables.
At 1 January 2019 the balance of the provision for doubtful debts was $1200.
Which entry does Ali make in the provision for doubtful debts account at 31 December 2019?

Q: What topic does this question test?

This question tests Bad Debts and Provision for Doubtful Debts in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting Oct/Nov 2020 examination, Paper 1 Variant 2 (9706_w20_qp_12.pdf).

Question

Ali's trade receivables at 31 December 2019 were $26500. He knew that $400 of these were irrecoverable.
He wished to maintain a provision for doubtful debts equal to 5% of the trade receivables.
At 1 January 2019 the balance of the provision for doubtful debts was $1200.
Which entry does Ali make in the provision for doubtful debts account at 31 December 2019?

Oracle Prep · Accepted Answer

The correct answer is A: $105 credit.

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