Question Tag: Doubtful Debts

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q2 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)

This question discusses the audit steps required to assess the true position of a loan portfolio and the provision for doubtful debts.

Your firm, Alheri & Co, has been appointed to carry out an audit assignment on Barders Bank Limited. The Bank’s year ended 30 September 2010. In the process of carrying out this assignment, it was discovered that no provision was made for doubtful debts. Total loans and advances of N50 billion consisting of 200 customers were found to be at various stages of performance except a N1 billion term loan granted to a Director’s relation’s company on 31 December 2009 to be repaid in N100 million monthly equal instalments commencing from 31 January 2010. Interest was simply agreed at N100,000 per month.

As at the time of this audit, no repayment had been made on this loan.

Required:
a. What audit steps should be taken to ascertain the true position of the loan portfolio? (5 Marks)
b. State the basis and determine the provision that should be made on the loan portfolio. (10 Marks)
(Total 15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2012 – L3 – SB – Q2 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)"

  • 1 Marks

FA – May 2021 – L1 – SA – Q6 – Accounting Treatment for Bad and Doubtful Debts

Impact of a reduction in allowance for doubtful receivables on profit.

Which of the following is the effect of a reduction in allowances for doubtful receivables?
A. A reduction in gross profit
B. A reduction in profit for the period
C. A reduction in cash balance
D. Increase in profit for the period
E. Increase in cash balance

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2021 – L1 – SA – Q6 – Accounting Treatment for Bad and Doubtful Debts"

  • 1 Marks

FA – Nov 2023 – L1 – SA – Q3 – Accounting Concepts

Determine the allowance for doubtful debts based on company policy.

What is the general allowance for doubtful debts in the statement of profit or loss at the current year-end, based on the company’s policy?

A. N52,000
B. N60,500
C. N105,000
D. N112,500
E. N173,500

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – Nov 2023 – L1 – SA – Q3 – Accounting Concepts"

  • 3 Marks

FA – May 2016 – L1 – SA – Q17 – Accounting Treatment for Bad and Doubtful Debts

Identifying the effect of a reduction in the allowance for doubtful debts.

Which of the following reflects the effect of a reduction in the allowance for doubtful debts?
A. Reduction in net profit
B. Reduction in cash balance
C. Reduction in gross profit
D. Increase in gross profit
E. Increase in net profit

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2016 – L1 – SA – Q17 – Accounting Treatment for Bad and Doubtful Debts"

  • 1 Marks

FA – May 2024 – L1 – SA – Q3 – Accounting Treatment for Bad and Doubtful Debts

Differentiates between bad debts and doubtful debts.

Which of the following statements correctly differentiates bad debt from doubtful debt?

A. Bad debt arises when a customer is in difficulty but might be able to recover from it, while doubtful debt is an amount owed by a customer that the business believes it will never be able to collect.

B. Bad debt is an amount owed by a customer that the business believes it will never be able to collect, while doubtful debt is an amount owed by a customer that the business hopes to collect despite the customer’s difficulties.

C. Bad debt is an amount owed by a customer that the business believes it might be able to collect despite difficulties, while doubtful debt arises when a customer is dishonest and has no intention to pay.

D. Bad debt occurs when a customer disputes whether a contract has been fulfilled or not, while doubtful debt arises when a customer is declared bankrupt or insolvent.

E. Bad debt refers to the dishonesty of a customer, while doubtful debt is an amount owed by a customer that the business believes it might not be able to collect, but still hopes to do so.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2024 – L1 – SA – Q3 – Accounting Treatment for Bad and Doubtful Debts"

  • 5 Marks

CR – Nov 2017 – L3 – Q2d – IAS 10: Events After the Reporting Period

Recommend the accounting treatment for a doubtful debt arising after the reporting period.

Adonko Ltd is a listed Ghanaian company that reports under International Financial Reporting Standards (IFRS) with 31 December as the financial year-end. The company performed some work for Adenta Municipal Assembly, a local government authority, during 2016 and issued an invoice for the work for GH¢12 million in July 2016. The invoice was accepted as valid by the local government authority but remains unpaid at the year-end.

In January 2017, following extensive press coverage, financial information was published showing that Adenta Municipal Assembly is heavily indebted and is unable to meet its obligations and pay its suppliers, including Adonko Ltd. This was unexpected by Adonko Ltd, and no allowance had previously been made against the debt in Adonko Ltd’s financial statements.

The Government of Ghana stated on 1 February 2017 that it was not prepared to fund the excesses of regional and local governments and that regional and local governments will need to make the necessary sacrifices to balance their budgets. Adenta Municipal Assembly stated that its priority was the provision of social amenities and economic well-being of its inhabitants and that other suppliers must wait for payment, with no date specified. Based on written correspondence with the local government’s legal advisers, Adonko Ltd believes it will eventually receive full payment, although this may take several years, and that interest on late payments is unlikely.

Required:
As the Finance Director of Adonko Ltd, recommend the accounting treatment of the above, in the financial statements for the year ended 31 December 2016.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2d – IAS 10: Events After the Reporting Period"

  • 20 Marks

FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, doubtful debts, and prepayments.

The following trial balance was extracted from the books of Nsaa Zolko, a sole trader, on 31 December 2020:

Account Debit (GHȼ) Credit (GHȼ)
Land 251,200
Equipment 202,220
Accumulated depreciation on equipment 62,830
Inventory 49,620
Receivable and Payable 124,200 104,350
Value Added Tax (refund due) 10,320
Deposit on rented premises (security deposit) 17,900
Bank and Cash balances 15,640
Allowance for doubtful debt 11,250
Tax Liability 7,420
Business Rent 30,000
Sales 804,500
Purchases 390,200
Returns 8,300 7,500
Discount 4,300 6,240
Distribution and Advertising 8,900
Power 4,200
Communication 1,540
Insurance 22,500
Wages and Salaries 164,380
Employers Social Security contribution 16,560
4% Long term loan 182,500
Long term loan interest 3,520
Bad debt 2,240
Drawings 10,580
Retained Earnings 44,820
Capital 103,710
Suspense 3,200
Total 1,338,320 1,338,320

Additional Information: i) The inventory count as at 31 December 2020 showed closing inventory value at GHȼ42,390. ii) Nsaa Zolko has agreed an annual rent of GHȼ40,000 with his landlord. iii) Included in insurance above is an amount of GHȼ18,000 paid to insure the equipment. The policy year ends 28 February 2021. iv) Nsaa Zolko has specific concerns over GHȼ5,120 of receivables balance and wishes to set up a specific provision with respect to these balances. The general provision on the remaining receivable balance should be at 5%. v) Depreciation is to be charged as follows:

  • Land: No Provision
  • Equipment: 15% reducing balance method (Depreciation should be calculated to the nearest whole number). vi) The suspense account balance above relates to sales of GHȼ1,600 which was recorded as purchases in error. The receivables and payables balances are correct.

Required:
a) Prepare a Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)

b) Prepare a Statement of Financial Position as at 31 December 2020.
(10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q2 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)

This question discusses the audit steps required to assess the true position of a loan portfolio and the provision for doubtful debts.

Your firm, Alheri & Co, has been appointed to carry out an audit assignment on Barders Bank Limited. The Bank’s year ended 30 September 2010. In the process of carrying out this assignment, it was discovered that no provision was made for doubtful debts. Total loans and advances of N50 billion consisting of 200 customers were found to be at various stages of performance except a N1 billion term loan granted to a Director’s relation’s company on 31 December 2009 to be repaid in N100 million monthly equal instalments commencing from 31 January 2010. Interest was simply agreed at N100,000 per month.

As at the time of this audit, no repayment had been made on this loan.

Required:
a. What audit steps should be taken to ascertain the true position of the loan portfolio? (5 Marks)
b. State the basis and determine the provision that should be made on the loan portfolio. (10 Marks)
(Total 15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2012 – L3 – SB – Q2 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)"

  • 1 Marks

FA – May 2021 – L1 – SA – Q6 – Accounting Treatment for Bad and Doubtful Debts

Impact of a reduction in allowance for doubtful receivables on profit.

Which of the following is the effect of a reduction in allowances for doubtful receivables?
A. A reduction in gross profit
B. A reduction in profit for the period
C. A reduction in cash balance
D. Increase in profit for the period
E. Increase in cash balance

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2021 – L1 – SA – Q6 – Accounting Treatment for Bad and Doubtful Debts"

  • 1 Marks

FA – Nov 2023 – L1 – SA – Q3 – Accounting Concepts

Determine the allowance for doubtful debts based on company policy.

What is the general allowance for doubtful debts in the statement of profit or loss at the current year-end, based on the company’s policy?

A. N52,000
B. N60,500
C. N105,000
D. N112,500
E. N173,500

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – Nov 2023 – L1 – SA – Q3 – Accounting Concepts"

  • 3 Marks

FA – May 2016 – L1 – SA – Q17 – Accounting Treatment for Bad and Doubtful Debts

Identifying the effect of a reduction in the allowance for doubtful debts.

Which of the following reflects the effect of a reduction in the allowance for doubtful debts?
A. Reduction in net profit
B. Reduction in cash balance
C. Reduction in gross profit
D. Increase in gross profit
E. Increase in net profit

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2016 – L1 – SA – Q17 – Accounting Treatment for Bad and Doubtful Debts"

  • 1 Marks

FA – May 2024 – L1 – SA – Q3 – Accounting Treatment for Bad and Doubtful Debts

Differentiates between bad debts and doubtful debts.

Which of the following statements correctly differentiates bad debt from doubtful debt?

A. Bad debt arises when a customer is in difficulty but might be able to recover from it, while doubtful debt is an amount owed by a customer that the business believes it will never be able to collect.

B. Bad debt is an amount owed by a customer that the business believes it will never be able to collect, while doubtful debt is an amount owed by a customer that the business hopes to collect despite the customer’s difficulties.

C. Bad debt is an amount owed by a customer that the business believes it might be able to collect despite difficulties, while doubtful debt arises when a customer is dishonest and has no intention to pay.

D. Bad debt occurs when a customer disputes whether a contract has been fulfilled or not, while doubtful debt arises when a customer is declared bankrupt or insolvent.

E. Bad debt refers to the dishonesty of a customer, while doubtful debt is an amount owed by a customer that the business believes it might not be able to collect, but still hopes to do so.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – May 2024 – L1 – SA – Q3 – Accounting Treatment for Bad and Doubtful Debts"

  • 5 Marks

CR – Nov 2017 – L3 – Q2d – IAS 10: Events After the Reporting Period

Recommend the accounting treatment for a doubtful debt arising after the reporting period.

Adonko Ltd is a listed Ghanaian company that reports under International Financial Reporting Standards (IFRS) with 31 December as the financial year-end. The company performed some work for Adenta Municipal Assembly, a local government authority, during 2016 and issued an invoice for the work for GH¢12 million in July 2016. The invoice was accepted as valid by the local government authority but remains unpaid at the year-end.

In January 2017, following extensive press coverage, financial information was published showing that Adenta Municipal Assembly is heavily indebted and is unable to meet its obligations and pay its suppliers, including Adonko Ltd. This was unexpected by Adonko Ltd, and no allowance had previously been made against the debt in Adonko Ltd’s financial statements.

The Government of Ghana stated on 1 February 2017 that it was not prepared to fund the excesses of regional and local governments and that regional and local governments will need to make the necessary sacrifices to balance their budgets. Adenta Municipal Assembly stated that its priority was the provision of social amenities and economic well-being of its inhabitants and that other suppliers must wait for payment, with no date specified. Based on written correspondence with the local government’s legal advisers, Adonko Ltd believes it will eventually receive full payment, although this may take several years, and that interest on late payments is unlikely.

Required:
As the Finance Director of Adonko Ltd, recommend the accounting treatment of the above, in the financial statements for the year ended 31 December 2016.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2d – IAS 10: Events After the Reporting Period"

  • 20 Marks

FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader

Preparation of the Statement of Profit or Loss and Statement of Financial Position for a sole trader, including adjustments for depreciation, doubtful debts, and prepayments.

The following trial balance was extracted from the books of Nsaa Zolko, a sole trader, on 31 December 2020:

Account Debit (GHȼ) Credit (GHȼ)
Land 251,200
Equipment 202,220
Accumulated depreciation on equipment 62,830
Inventory 49,620
Receivable and Payable 124,200 104,350
Value Added Tax (refund due) 10,320
Deposit on rented premises (security deposit) 17,900
Bank and Cash balances 15,640
Allowance for doubtful debt 11,250
Tax Liability 7,420
Business Rent 30,000
Sales 804,500
Purchases 390,200
Returns 8,300 7,500
Discount 4,300 6,240
Distribution and Advertising 8,900
Power 4,200
Communication 1,540
Insurance 22,500
Wages and Salaries 164,380
Employers Social Security contribution 16,560
4% Long term loan 182,500
Long term loan interest 3,520
Bad debt 2,240
Drawings 10,580
Retained Earnings 44,820
Capital 103,710
Suspense 3,200
Total 1,338,320 1,338,320

Additional Information: i) The inventory count as at 31 December 2020 showed closing inventory value at GHȼ42,390. ii) Nsaa Zolko has agreed an annual rent of GHȼ40,000 with his landlord. iii) Included in insurance above is an amount of GHȼ18,000 paid to insure the equipment. The policy year ends 28 February 2021. iv) Nsaa Zolko has specific concerns over GHȼ5,120 of receivables balance and wishes to set up a specific provision with respect to these balances. The general provision on the remaining receivable balance should be at 5%. v) Depreciation is to be charged as follows:

  • Land: No Provision
  • Equipment: 15% reducing balance method (Depreciation should be calculated to the nearest whole number). vi) The suspense account balance above relates to sales of GHȼ1,600 which was recorded as purchases in error. The receivables and payables balances are correct.

Required:
a) Prepare a Statement of Profit or Loss for the year ended 31 December 2020.
(10 marks)

b) Prepare a Statement of Financial Position as at 31 December 2020.
(10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FA – April 2022 – L1 – Q4 – Accruals and prepayments | Bad and doubtful debt | Non-current assets and depreciation | Preparation of financial statements of a sole trader"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@nbcinstitute.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
error: Content is protected !!
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan