Accounting 0452 · IGCSE · Irrecoverable debts and provision for doubtful debts
Irrecoverable debts and provision for doubtful debts — practice question
Ramla has already worked out her draft profit for the year ended 28 February 2023. However, the following adjustments still need to be posted to Ramla’s ledger accounts.
1 An amount of $99 owed to Ramla by Mai is to be written off as irrecoverable.
2 Fixtures and fittings, $875, were purchased on credit from Padma.
3 A loan repayment, $500, had been incorrectly recorded as loan interest.
4 Rent paid, $350, had been recorded as $530.
5 Drawings, $120, had been debited to the wages account.
(a)[10]
Prepare the journal entries needed for items 1-5. Narratives are not needed.
(b)[6]
Fill in the table below with the amount of each adjustment needed to work out Ramla’s adjusted profit. If an item has no impact on profit, put zero (0) in the ‘no effect on profit’ box.
(c(i))[2]
Explain how the journal entry for item 1 follows the prudence principle.
(c(ii))[2]
Explain how the journal entry for item 5 satisfies the business entity principle.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme.