Provision for discount allowed on outstanding debtors balances should be calculated, at an appropriate rate, on . . .
Select ONE answer:
- total debtors net of any bad debts written off.
- total debtors before the account is taken of bad debts.
- total debtors less total creditors.
- total debtors net of any bad debts written off and after deducting the cumulative amount of any provision for doubtful debts.
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
- Not correct
- Not correct
- Not correct
- Correct – Cash discount (also known as settlement discount) is allowed only to those customers who pay their accounts on time. The total amount of debtors estimated to pay their accounts on time equals total debtors less bad debts (these customers already owe money for some time) less the provision for bad debts (an estimate of the amount currently owed by debtors which it is probable will never be received — let alone received in time to warrant a cash discount).
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