Question 14 The opening provision for doubtful debts was £2600 and the closing provision for doubtful debts is £2100. Which one of the following describes the effect (on profits and assets) of the closing provision for doubtful debts adjusting entry? Hide answer choices A Reduction in profits of £500 and an increase in assets of £500. B Reduction in profits of ES00 and a reduction in assets of £500. Increase in profits of ES00 and a reduction in assets of £500. Increase in profits of £500 and an increase in assets of £500.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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