A trial balance shows the following: Debtors ₹50,000; Provision for doubtful debts ₹5,000. It is decided to maintain provision at 10% of debtors. The amount to be charged to Profit & Loss Account will be: MCQ with Answer and Explanation
A trial balance shows the following: Debtors ₹50,000; Provision for doubtful debts ₹5,000. It is decided to maintain provision at 10% of debtors. The amount to be charged to Profit & Loss Account will be:
A. ₹5,000
B. ₹2,500
C. ₹10,000
D. Nil
Answer: Option D
Solution (By JKSSB Mock Tests)
Required provision = 10% of 50,000 = 5,000. Existing provision is also ₹5,000. So no additional charge needed. Thus, nil.
Explanation:
The Previous Year is the financial year in which the income is earned, which is assessed to tax in the immediately following Assessment Year.
S1: Under Ind AS 109, financial assets are classified into three measurement categories: Amortized Cost, Fair Value Through Other Comprehensive Income (FVTOCI), and Fair Value Through Profit or Loss (FVTPL). S2: Equity investments are always measured at Amortized Cost. Which statement(s) is/are correct?
Explanation:
S1 is correct as per Ind AS 109. S2 is incorrect because equity investments do not have contractual cash flows that are solely payments of principal and interest (SPPI), so they cannot be measured at Amortized Cost; they are measured at FVTPL or FVTOCI.
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