CENTRE FOR PROFESSIONAL EXCELLENCE
Pre –Requisite Competencies (PRC)
Introduction to Accounting (ITA) Chapter # 05
Time Allowed: 45 minutes Total Marks: 30
1. Receivables at start of year was Rs. 100,000 and allowance for doubtful debts was Rs. 5,000. During
the year ended 31 December 2023 bad debts of Rs. 4,000 were written off and at end of year
receivables were Rs. 120,000.
In addition, bad debts recovered were Rs. 3,000. Company’s estimate of general allowance %remained
same.
How much net amount shall be transfer to statement of comprehensive income for the year ended 31
December 2023?
a) Rs. 2,000 Dr.
b) Rs. 2,000 Cr.
c) Rs. 8,000 Dr.
d) Rs. 8,000 Cr.
2. Khan Interprise has provided the following data for year ended 30 June 2024.
Accounts receivables balance at 1 July 2023 Rs. 185,000
Credit sales during the year Rs. 645,000
Bad debts written off Rs. 5,000 and to be written off Rs. 3,000
Cash and cheques received from customers Rs. 627,800
Bad debts recovered Rs. 7,000 (included in above cash and cheques received)
Accounts receivables balance at 30 June 2024 Rs. 186,400
The amount of credit sales returns during the year ended 30 June 2024 was:
a) Rs. 7,800
b) Rs. 10,800
c) Rs. 17,800
d) Rs. 14,800
3. A business has closing receivables balance is Rs. 75,000. It includes one of the accounts receivable
named Akram, who is going through financial crisis. It is expected that he can pay 75% of his total
debt of Rs. 5,000. Business has decided to calculate an allowance for doubtful debt at 5%.
What is the amount of allowance to be deducted from receivable in statement of financial position?
a) Rs. 3,500
b) Rs. 3,750
c) Rs. 7,250
d) Rs. 4,750
4. Receivables balances at end of year was Rs. 250,000; however in reviewing the account it was
discovered that following transactions were wrongly entered in receivables ledger.
Bad debts recovered of Rs. 5,000 was wrongly included in cash received from debtors
Decrease in allowance of Rs. 7,500 was wrongly credited in receivables ledger
Discount allowed of Rs. 2,200 was not entered in receivables ledger, rather discount received was
wrongly debited in receivables ledger by Rs. 1,700
What will be corrected receivable balance at end of year?
a) Rs. 258,100
b) Rs. 258,600
Sir Niaz Azam
c) Rs. 253,600
d) Rs. 254,600
5. The following data pertains to Azam Traders:
Opening balance of allowance for doubtful debts Rs.8,500
Bad debts written off during the year Rs.5,000
Closing balance of allowance for doubtful debt Rs.10,000
Bad debts written off included Rs.1,000 allowance balance which was provided in the previous year. The
bad debt expense for the year would be:
Select the most appropriate answer.
a) Rs. 6,000
b) Rs. 6,500
c) Rs. 7,500
d) Rs. 4,000
6. The general entry of decrease in allowance compared to previous year:
Debit Credit
a) Allowance Debtors
b) Debtors Allowance
c) Allowance Bad debts
d) Bad debts Allowance
7. In September 2023, a company wrote off an amount of Rs.60,000 due from a customer who had
become bankrupt. However, in January 2024, the company unexpectedly received half of the amount
due from the customer.
How should the company account for this amount in its accounts for the year ended on December
2024.
a) As an accrual for Rs. 30,000
b) As a prepayment of Rs. 30,000
c) As increase in provision for doubtful debt of Rs. 30,000
d) As other income of Rs. 30,000
8. Which of the following transaction will affect the receivable account:
a) Bad debt expense
b) Allowance for bad debts
c) Purchase returns
d) Trade Discount
9. Mega Providers started the year with total receivables of Rs. 87,000 and an allowance for receivables
of Rs. 2,500. During the year, two specific debts were written off, one for Rs. 800 and the other for
Rs. 550. A debt of Rs. 350 that had been written off as irrecoverable in the previous year was paid
during the year. At the year end, total receivables were Rs. 90,000 and the allowance for receivables
was Rs. 2,300.
What is the charge to the Statement of Profit or Loss for the year in respect of bad and doubtful
debts?
a) Rs. 800
b) Rs. 1,00
c) Rs. 1,150
d) Rs. 1,550
10. You are provided with the data as follow:
Receivables balances at start of year Rs.175,000
Receivables balances at the end of year Rs.193,000
Discount Allowed Rs.6,000
Discount Received Rs.3,000
Bad debts written off Rs.2,000
Sir Niaz Azam
Bad debts to be written off Rs.4,000
Increase in allowance Rs.6,700
Cheque received from suppliers & from customers Rs.53,000 & Rs. 356,000
Cash sales Rs.45,000
Sales Returns ( of which 1/3rd relates to cash sales) Rs.6,000
What will be the net credit sales for the year?
a) Rs. 382,000
b) Rs. 427,000
c) Rs. 425,000
d) Rs. 431,000
11. The opening and closing allowances of doubtful debts of a company were Rs. 15,200 and 16,800. The
accountant treated opening allowance as closing allowance and vice versa.
Which of the following statements is true as result of above error?
a) Charge for the year was overstated by Rs. 1,600
b) Charge for the year was understated by Rs. 1,600
c) Charge for the year was overstated by Rs. 3,200
d) Charge for the year was understated by Rs. 3,200
12. Which of the following is NOT a reason for recording the doubtful debts in books?
a) Customer is in severe financial difficulties
b) Customer was declared bankrupt and liquidator confirmed that no amount could be paid to our
business
c) Customer took too long to pay its debts
d) Customer facing operational difficulties like strikes etc.
13. Which of the following TWO are treated as reduction in expense for the year?
a) Bad debts written off
b) Increase in allowance for doubtful debts
c) Decrease in allowance for doubtful debts
d) Bad debts recovered
14. Nasir enterprises allowance for doubtful debts as at 1 July 2023 was Rs. 18,000. During the year, no
bad debts were written off, however, at end of year, Nasir Enterprises created specific allowance of
Rs. 16,000. The amount of Rs. 17,200 was charged to expense for the year ended 30 June 2024. The
accounts receivables as at 30 June 2024 was Rs. 400,000.
The % of general allowance that was used to calculate above was:
a) 4.00%
b) 4.30%
c) 4.50%
d) 4.80%
15. Which TWO of following entries can be passed, if bad debts recovered during the year?
Debit Credit
a) Bad debt expense Account Receivables
b) Account receivables Bad debts expense
c) Cash / bank Bad debts expense
d) Cash / bank Bad debts recovered
Best of Luck
Sir Niaz Azam
