The directors of Woodbank Ltd are anxious to improve the profit to be reported for the accounting period just ended. Which of the following would improve the profit reported? a) Increasing the rate of provision for doubtful debts from 10% to 12% of all balances over 60 days old. b) Creating a provision for possible warranty claims against the company. c) Changing from a reducing balance to a straight-line basis for computing depreciation on new non-current assets. d) Writing down the value of closing inventory on the basis of damage to the stock.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The directors of Woodbank Ltd are anxious to improve the profit to be reported for the
accounting period just ended. Which of the following would improve the profit reported?
a) Increasing the rate of provision for doubtful debts from 10% to 12% of all balances over
60 days old.
b) Creating a provision for possible warranty claims against the company.
c) Changing from a reducing balance to a straight-line basis for computing
new non-current assets.
d) Writing down the value of closing inventory on the basis of damage to the stock.
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