Accounting Multiple Choice Question – 12 October 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

At 30 November, Charles is owed a total of £72,660 by his customers. His receivables allowance brought forward from the previous year end is £11,700. He estimates that his receivables allowance should be equivalent to 15% of the amounts due from customers.

What value should be included in the income statement for receivables expense for the year to 30 November?

Select ONE answer:

  1. £801 debit
  2. £10,899 debit
  3. £801 credit
  4. £10,899 credit
  5. £11,700 credit

Show your workings to arrive at your answer, and explain and justify your reasons?……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – The receivables allowance should be equivalent to 15% of the amounts due from customers (£72,660 x 15% = £10,899). If a candidate completes this calculation and then reviews the choices, there is a danger that, because £10,899 is included in two of the choices, one or other of those choices will be selected. This ignores the fact that the amount to be included in the income statement is the movement in the allowance – which has fallen from £11,700 to £10,899, or £801. A reduction in the allowance will be a credit in the income statement, thus the answer is 3.

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