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By Accounting Mcqs No Comments

Under the direct write-off method of recognizing a bad debt expense. Which of the following statements is/are true?

A. The bad debt expense is not matched with the related sales
B. Revenue is overstated in the year of sales
C. It violates the matching principle of accounting
D. All of the above

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Under the direct write off method of recognizing a bad debt expense, the alternative D. is the correct answer which the combination of the following statements A. The bad debt expense is not matched with the related sales because the expense is written off in the year of occurrence and it is not matching with the related sales. B. Revenue is overstated in the year of Sales as a result not making any provision for possible loss on account of non- recoverable account. C. It violates the matching principle of accounting as the expense of bad debt is not matched for the same period of income. Thus, D. is the correct answer.

Related Mcqs:

  1. If actual bad debts are more than the provision for bad debts, then there will be a_____________?

    A. Credit balance of Provision for Bad Debts Account
    B. Debit balance of Provision for Bad Debts Account
    C. Debit balance of Bad Debts Account
    D. Debit balance of Discount on Debtors Account

  2. An increase in provision for bad debt will____________?

    A. Decrease net income
    B. Decrease liabilities
    C. Increase net income
    D. Increase liabilities

  3. At the time of preparation of financial accounts, bad debt recovered account will be transferred to?

    A. Debtors A/c
    B. Profit & Loss A/c
    C. Profit & Loss Adjustment A/c
    D. Profit & Loss Appropriation A/c

  4. Which of the following is the normal balance of a rent expense account?

    A. Credit balance
    B. Cash balance
    C. Overdraft
    D. Debit balance

  5. Which of the following statements is true with regard to written down value method of depreciation?
    i. The rate at which the asset is written off reduces year after year
    ii. The amount of depreciation provided reduces from year to year
    iii. The rate of depreciation as well as the amount of depreciation reduce year after year
    iv. The value of the asset gets reduced to zero over a period of time

    A. Only (i) above
    B. Only (ii) above
    C. Both (i) and (ii) above
    D. (i),(ii) and (iii) above

  6. Revenue and expense accounts are referred as______________?

    A. Nominal accounts
    B. Real account
    C. Cash accounts
    D. Banks account

  7. Which of the following is true with respect to providing depreciation under diminishing balance method?

    A. The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing
    B. The amount of depreciation and the rate of depreciation decrease every year
    C. The amount of depreciation decreases while the rate of depreciation remains the same
    D. The amount of depreciation and the rate of depreciation increases every year

  8. Bad debts recovered account will be transferred to______________?

    A. Debtor‘s Account
    B. Profit and Loss Account
    C. Provision for Doubtful Debt Account
    D. Either B or C above

  9. The entry for creating a Provision for bad debts is_____________?

    A. Debit Provision for Bad Debts A/c and credit Debtors A/c
    B. Debit Debtors A/c and credit Provision for Bad Debts A/c
    C. Debit Provision for Bad Debts A/c and credit Profit & Loss A/c
    D. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.

  10. Bad debts recovered is:

    A. Credited to P&L A/c
    B. Debited to P&L A/c
    C. Reduced from debtors in Balance Sheet
    D. Added to debtors in Balance Sheet

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The correct answer to the question: "Under the direct write-off method of recognizing a bad debt expense. Which of the following statements is/are true?" is "All of the above".

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