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Which of the following statement is not true-
- a)Actual bad-debts are not adjusted against the provision for bad debts a/c.
- b)Bad-debts could be more than provision for bad debts
- c)Bad debts could be less than provision for bad debts
- d)Provision for bad debts is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.
Correct answer is option 'A'. Can you explain this answer?
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Which of the following statement is not true-a)Actual bad-debts are no...
Explanation:
The correct statement is option 'A': Actual bad-debts are not adjusted against the provision for bad debts a/c.
Provision for bad debts is the amount set aside by a business concern in order to cover any future losses that may occur due to non-payment of dues by its debtors. It is a contra account of debtors and is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.
Bad debts, on the other hand, are those debts that are not recoverable from the debtors due to various reasons such as insolvency, bankruptcy, death, etc. Bad debts are written off from the debtors account and are recorded as expenses in the income statement.
To understand why option 'A' is not true, we need to understand the concept of provision for bad debts and actual bad debts.
- Provision for bad debts: As mentioned earlier, provision for bad debts is the amount set aside by a business concern in order to cover any future losses that may occur due to non-payment of dues by its debtors. This provision is made on the basis of past experience, market conditions, and the overall economic environment. The provision is an estimate of the amount of bad debts that may occur in the future.
- Actual bad debts: Actual bad debts are the debts that are actually written off during a particular accounting period. These debts are those that have become irrecoverable and cannot be collected from the debtors.
Now, coming back to option 'A', it is not true that actual bad debts are not adjusted against the provision for bad debts account. In fact, when actual bad debts occur, they are adjusted against the provision for bad debts account. This is because the provision for bad debts is created to cover any future losses that may occur due to non-payment of dues by the debtors. When actual bad debts occur, it means that the provision for bad debts was not sufficient to cover the losses. Therefore, the provision for bad debts is reduced by the amount of actual bad debts that are written off.
In summary, the provision for bad debts is created to cover any future losses that may occur due to non-payment of dues by the debtors. Actual bad debts are adjusted against the provision for bad debts account as they occur.
The correct statement is option 'A': Actual bad-debts are not adjusted against the provision for bad debts a/c.
Provision for bad debts is the amount set aside by a business concern in order to cover any future losses that may occur due to non-payment of dues by its debtors. It is a contra account of debtors and is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.
Bad debts, on the other hand, are those debts that are not recoverable from the debtors due to various reasons such as insolvency, bankruptcy, death, etc. Bad debts are written off from the debtors account and are recorded as expenses in the income statement.
To understand why option 'A' is not true, we need to understand the concept of provision for bad debts and actual bad debts.
- Provision for bad debts: As mentioned earlier, provision for bad debts is the amount set aside by a business concern in order to cover any future losses that may occur due to non-payment of dues by its debtors. This provision is made on the basis of past experience, market conditions, and the overall economic environment. The provision is an estimate of the amount of bad debts that may occur in the future.
- Actual bad debts: Actual bad debts are the debts that are actually written off during a particular accounting period. These debts are those that have become irrecoverable and cannot be collected from the debtors.
Now, coming back to option 'A', it is not true that actual bad debts are not adjusted against the provision for bad debts account. In fact, when actual bad debts occur, they are adjusted against the provision for bad debts account. This is because the provision for bad debts is created to cover any future losses that may occur due to non-payment of dues by the debtors. When actual bad debts occur, it means that the provision for bad debts was not sufficient to cover the losses. Therefore, the provision for bad debts is reduced by the amount of actual bad debts that are written off.
In summary, the provision for bad debts is created to cover any future losses that may occur due to non-payment of dues by the debtors. Actual bad debts are adjusted against the provision for bad debts account as they occur.
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Which of the following statement is not true-a)Actual bad-debts are not adjusted against the provision for bad debts a/c.b)Bad-debts could be more than provision for bad debtsc)Bad debts could be less than provision for bad debtsd)Provision for bad debts is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.Correct answer is option 'A'. Can you explain this answer?
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Which of the following statement is not true-a)Actual bad-debts are not adjusted against the provision for bad debts a/c.b)Bad-debts could be more than provision for bad debtsc)Bad debts could be less than provision for bad debtsd)Provision for bad debts is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following statement is not true-a)Actual bad-debts are not adjusted against the provision for bad debts a/c.b)Bad-debts could be more than provision for bad debtsc)Bad debts could be less than provision for bad debtsd)Provision for bad debts is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statement is not true-a)Actual bad-debts are not adjusted against the provision for bad debts a/c.b)Bad-debts could be more than provision for bad debtsc)Bad debts could be less than provision for bad debtsd)Provision for bad debts is shown as a liability in the balance sheet or may be deducted from the debtors in the balance sheet.Correct answer is option 'A'. Can you explain this answer?.
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