Bad Debts And Provision For Bad Debts: Meaning - SS1 Accounting Past Questions and Answers - page 1
1
What are bad debts?
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A
Amounts owed by a business to its suppliers
B
Amounts owed to a business by its customers that are unlikely to be paid in full
C
Expenses incurred by a business on repairing its equipment
D
Costs associated with shipping products to customers
2
What is a provision for bad debts?
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A
A legal document that allows a business to recover its bad debts
B
An accounting entry that sets aside a portion of a company's revenue to cover potential future losses from bad debts
C
A loan that a business takes to cover its bad debts
D
A strategy that a business uses to avoid bad debts
3
What can be the reasons for bad debts?
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A
Customers not being satisfied with the products
B
Customers defaulting on their payments
C
The business not being able to deliver products on time
D
All of the above
4
Why is a provision for bad debts important in accounting?
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A
It helps a business to manage its cash flow
B
It helps a business to avoid bad debts
C
It helps a business to increase its revenue
D
It helps a business to reduce its expenses
5
Which of the following represents the actual losses a business incurs from bad debts?
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A
Bad debts
B
Provision for bad debts
C
Accounts receivable
D
Accounts payable
7
Why is a provision for bad debts important in accounting?
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