Economics · Financial Accounting and Final Accounts
In the systematic preparation of final accounts for a commercial entity, the sequence of adjustments regarding accounts receivable is crucial. When a company decides to create a provision for discount on debtors, at which specific stage of the adjustment process must this calculation be performed?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It is performed on the gross debtors as shown in the trial balance regardless of any other year-end adjustments.
- 2It must be performed only on the balance of debtors remaining after both further bad debts and provision for doubtful debts have been deducted.✓
- 3It is done immediately after recording further bad debts but prior to calculating the provision for doubtful debts.
- 4It must be performed before the write-off of any further bad debts discovered during the year-end audit.
Correct answer
It must be performed only on the balance of debtors remaining after both further bad debts and provision for doubtful debts have been deducted.
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