A trial balance at 30 June, before making end of year adjustments, showed the following.

| | debit $ | credit $ |
|---|---|---|
| trade receivables | 35600 | – |
| provision for doubtful debts | – | 1160 |

At 30 June, it was decided to write off a bad debt of $1600 and to make a provision for doubtful debts equal to 2% of trade receivables.

What was the total decrease in the profit for the year ended 30 June arising from the bad and doubtful debts?

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

This question appeared in the Cambridge A-Level Accounting Oct/Nov 2015 examination, Paper 1 Variant 2 (9706_w15_qp_12.pdf).

Question

A trial balance at 30 June, before making end of year adjustments, showed the following.

| | debit $ | credit $ |
|---|---|---|
| trade receivables | 35600 | – |
| provision for doubtful debts | – | 1160 |

At 30 June, it was decided to write off a bad debt of $1600 and to make a provision for doubtful debts equal to 2% of trade receivables.

What was the total decrease in the profit for the year ended 30 June arising from the bad and doubtful debts?

Oracle Prep · Accepted Answer

The correct answer is B: $1120.

✓ Correct Answer