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Conservatism Concept

The provision...

Question

The provisions for bad debts and provision for cash discounts which appear as a deduction from sundry debtors in the balance sheet is due to the application of _________.

A

consistency principle

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B

conservatism principle

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C

materiality principle

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D

revenue recognition principle

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Solution

The correct option is B conservatism principle
The provisions for bad debts and provision for cash discounts which appear as a deduction from sundry debtors in the balance sheet is due to the application of Conservatism principle.
According to conservatism principle all the expenses and losses should be recorded as soon as possible when there is uncertainty about the outcome, but to recognize revenues only when they are assured of being received.

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Q. C's Trial Balance contains the following information: Bad debts Rs. 8,000, Provision for Doubtful debts Rs. 6,000, Sundry debtors Rs. 25,000.It is desired to create a provision for bad debts at 10% on Sundry debtors at the end of the year. Sundry debtors (after provision) will appear in Balance Sheet at a figure of :

Q. Sundry debtors given in the Trial Balance are Rs. 20000. Further bad debts amounted to Rs. 1000 and it is desired to create a provision of

5 %

on debtors for doubtful debts and

2 %

for discount. Sundry Debtors will appear in the Balance Sheet at a figure of________.

Q. H's Trial Balance contains the following information:
Bad debts Rs. 3,000
Discount allowed Rs. 3,000
Provision for discount on debtors Rs.3,200
Provision for bad debts Rs. 3,500
Sundry Debtors Rs. 50,000
At the end of the year, it is desired to maintain a provision for bad debts at Rs. 4,000 and provision for discount on debtors at Rs. 2,000. Sundry Debtors will appear in the Balance Sheet at a figure of:

Q. A Trial Balance contains the following information :

Bad debts	Rs.5,000
Discount allowed	Rs.4,000
Provision for discount on debtors	Rs.2,000
Provision for Doubtful Debts	Rs.5,000
Sundry Debtors	Rs.50,000

At the end of the year, it is desired to maintain a provision for debts at Rs. 4,000 and provision for discount on debtors at Rs.2,000. Sundry Debtors (after provision) will appear in the Balance Sheet at a figure of :

Q. Provision for bad debts are also known as deduction from __________ from balance sheet.

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