Which accounting principle is followed in adopting policy of making provision for doubtful debts @5% on debtors ?

Prudence

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Materiality

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Solution

The correct option is A Prudence
The prudence principle is followed in adopting policy of making provision for doubtful debts @5% on debtors. Prudence principle or conservatism principle means all the expenses or possible losses should be recorded in advance, but incomes should not be recorded in advance.

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Similar questions

By providing for discount on debtors and making provision for doubtful debts, which accounting concept is followed?

Is provision for discount on debtors made before making provision for doubtful debts?

Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2017

	Rs
Debtors	80,000
Bad debts	2,000
Provision for doubtful debts	5,000

Adjustments:

Bad Debts Rs 500 Provision on Debtors @ 3%.

Following information is given in trail balance

$\begin{matrix} Bad debt & R s . 3, 000 Provision for bad debts & R s . 3, 500 Debtors & R s . 40, 000 \end{matrix}$

Additional Information:

It is desired to make a provision for doubtful debts @10% on debtors. Find the amount to be debited to profit and loss account.

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