Irrecoverable Debts And Provision For Doubtful Debts (Copy)
Topic 4.4: Irrecoverable Debts and Provision for Doubtful Debts – Quiz
O Level and IGCSE Accounting
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. What is an irrecoverable debt?
A. A debt still to be received
B. A debt paid early
C. A debt that cannot be collected
D. A debt paid in advance
2. Which journal entry records an irrecoverable debt?
A. Dr Irrecoverable Debts, Cr Sales
B. Dr Debtor, Cr Irrecoverable Debts
C. Dr Irrecoverable Debts, Cr Trade Receivables
D. Dr Cash, Cr Debtor
3. Where is the irrecoverable debts expense shown in the financial statements?
A. Current assets
B. Statement of financial position liabilities
C. Income statement
D. Capital
4. The recovery of a debt previously written off is recorded as:
A. Dr Sales, Cr Debtor
B. Dr Debtor, Cr Bank
C. Dr Bank, Cr Irrecoverable Debts Recovered
D. Dr Trade Receivables, Cr Capital
5. What is the effect of writing off an irrecoverable debt on total assets?
A. No effect
B. Increase in assets
C. Decrease in liabilities
D. Decrease in assets
6. What is the purpose of a provision for doubtful debts?
A. Increase reported profits
B. Match potential losses with current income
C. Avoid taxation
D. Increase capital
7. A customer owing $1,000 is declared bankrupt. What is the journal entry?
A. Dr Bank $1,000, Cr Trade Receivables
B. Dr Irrecoverable Debts $1,000, Cr Trade Receivables
C. Dr Trade Receivables $1,000, Cr Capital
D. Dr Sales $1,000, Cr Irrecoverable Debts
8. Recovery of a bad debt after it has been written off is:
A. Capital income
B. Revenue income
C. Adjustment to assets
D. Non-cash item
9. Where is provision for doubtful debts shown in the financial statements?
A. Deducted from capital
B. Deducted from trade receivables
C. Added to liabilities
D. As an income
10. Which entry creates a provision for doubtful debts of $400?
A. Dr Irrecoverable Debts $400, Cr Trade Receivables
B. Dr Trade Receivables $400, Cr Provision for Doubtful Debts
C. Dr Income Statement $400, Cr Provision for Doubtful Debts
D. Dr Provision for Doubtful Debts, Cr Trade Receivables
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
11. Which account is credited when a bad debt is written off?
A. Sales
B. Trade Receivables
C. Bank
D. Capital
12. A provision is increased from $1,000 to $1,300. What is the adjustment?
A. Debit Provision $300
B. Credit Provision $300
C. Debit Income Statement $300
D. Credit Income Statement $300
13. If a provision is reduced from $1,000 to $700, what is the journal entry?
A. Dr Provision $300, Cr Income Statement
B. Dr Income Statement $300, Cr Provision
C. Dr Provision $300, Cr Sales
D. Dr Capital, Cr Provision
14. An increase in provision for doubtful debts affects:
A. Profit increases
B. Profit decreases
C. Capital increases
D. Trade payables decrease
15. A decrease in provision for doubtful debts affects:
A. Profit increases
B. Profit decreases
C. No effect
D. Assets increase
16. What is the journal entry for recovery of a debt after it was written off?
A. Dr Debtor, Cr Sales
B. Dr Bank, Cr Irrecoverable Debts Recovered
C. Dr Irrecoverable Debts, Cr Bank
D. Dr Bank, Cr Trade Payables
17. A provision for doubtful debts is an example of which accounting principle?
A. Consistency
B. Accruals/matching
C. Prudence
D. Money measurement
18. Provision for doubtful debts is based on:
A. Creditors
B. Sales revenue
C. Trade receivables
D. Profit
19. If provision is 5% and trade receivables are $10,000, what is the provision?
A. $500
B. $1,000
C. $50
D. $5,000
20. Which of the following is revenue expenditure?
A. Motor vehicle purchase
B. Provision for doubtful debts
C. Land purchase
D. Office building
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
21. The impact of writing off a bad debt is to:
A. Increase profit
B. Reduce capital
C. Increase assets
D. Reduce assets and profit
22. Which of these is not a reason for maintaining provision for doubtful debts?
A. To match expenses with income
B. To prepare for future uncertainty
C. To comply with prudence
D. To reduce trade payables
23. Where is recovery of bad debt shown in financial statements?
A. Deduction from expenses
B. As other income
C. Addition to trade receivables
D. As capital income
24. A provision for doubtful debts appears in the balance sheet as:
A. Asset
B. Liability
C. Deduction from assets
D. Addition to expenses
25. The journal entry to reduce provision from $600 to $400 is:
A. Dr Provision $200, Cr Income Statement
B. Dr Income Statement $200, Cr Provision
C. Dr Provision $200, Cr Debtors
D. Dr Debtors, Cr Provision
26. Irrecoverable debt is recorded only when:
A. It is written off
B. The debtor delays
C. It is overdue
D. It is under negotiation
27. Recovering a debt increases:
A. Liabilities
B. Trade receivables
C. Revenue
D. Bank balance
28. When a provision is created for the first time, it is:
A. Added to capital
B. Charged to profit and loss
C. Added to trade payables
D. Not recorded
29. What is the double entry for bad debt recovery?
A. Dr Trade Receivables, Cr Bank
B. Dr Bank, Cr Irrecoverable Debts Recovered
C. Dr Bank, Cr Sales
D. Dr Provision, Cr Debtors
30. The effect of a provision is to:
A. Increase receivables
B. Reduce reported asset value
C. Increase capital
D. Reduce revenue
Answer key and explanations
Topic 4.4 – Irrecoverable Debts and Provision for Doubtful Debts
O Level and IGCSE Accounting
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. Correct Answer: C
Explanation: An irrecoverable debt is one that is certain to never be received due to insolvency or other confirmed reason.
2. Correct Answer: C
Explanation: The proper entry is Dr Irrecoverable Debts (expense), Cr Trade Receivables (to remove the amount).
3. Correct Answer: C
Explanation: Irrecoverable debts are treated as an expense and shown in the income statement.
4. Correct Answer: C
Explanation: When a previously written-off debt is recovered, Dr Bank and Cr Irrecoverable Debts Recovered (other income).
5. Correct Answer: D
Explanation: Writing off a debt reduces total assets as the receivable is removed.
6. Correct Answer: B
Explanation: Provision for doubtful debts helps match potential bad debt expense with the revenue it relates to.
7. Correct Answer: B
Explanation: Dr Irrecoverable Debts, Cr Trade Receivables to reflect the bad debt write-off.
8. Correct Answer: B
Explanation: It is income for the current period, hence recorded as revenue income.
9. Correct Answer: B
Explanation: Provision is deducted from trade receivables in the balance sheet to show expected realizable value.
10. Correct Answer: C
Explanation: Creating provision: Dr Income Statement (expense), Cr Provision for Doubtful Debts (liability/contra asset).
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
11. Correct Answer: B
Explanation: Credit Trade Receivables to remove the irrecoverable amount.
12. Correct Answer: C
Explanation: The increase is charged as an expense: Dr Income Statement $300, Cr Provision $300.
13. Correct Answer: A
Explanation: Reducing provision: Dr Provision $300, Cr Income Statement (gain).
14. Correct Answer: B
Explanation: Increase in provision increases expenses and reduces profit.
15. Correct Answer: A
Explanation: A reduction in provision reduces expenses → increases profit.
16. Correct Answer: B
Explanation: Recovery: Dr Bank, Cr Irrecoverable Debts Recovered (treated as income).
17. Correct Answer: C
Explanation: Provision is based on prudence — anticipating potential losses conservatively.
18. Correct Answer: C
Explanation: Provision is calculated on total trade receivables balance.
19. Correct Answer: A
Explanation: 5% of $10,000 = $500.
20. Correct Answer: B
Explanation: Provision is a regular recurring expense (revenue expenditure).
21. Correct Answer: D
Explanation: Bad debt reduces both assets and profit.
22. Correct Answer: D
Explanation: Provision does not relate to trade payables—it’s for receivables.
23. Correct Answer: B
Explanation: It is shown as other income in the income statement.
24. Correct Answer: C
Explanation: It’s a deduction from trade receivables, not an independent liability.
25. Correct Answer: A
Explanation: Provision decrease: Dr Provision $200, Cr Income Statement (gain).
26. Correct Answer: A
Explanation: A debt must be officially written off to be classified as irrecoverable.
27. Correct Answer: D
Explanation: Recovery increases bank balance — cash received.
28. Correct Answer: B
Explanation: A new provision is recorded as an expense in the income statement.
29. Correct Answer: B
Explanation: Recovery: Dr Bank, Cr Irrecoverable Debts Recovered (income account).
30. Correct Answer: B
Explanation: Provision reduces the net receivables reported in the statement of financial position.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course