Name: ………………………………………………….

Class……………………

Cambridge International school, Dubai

Topic test – May ‘21

Yr.10 Accounting Op1 Date: 5-5-21
Teacher: MOD Marks 20 .
Answer all questions
Ali ,a trader maintains his financial year ending on 31st December.
September 8 ,2020 - Ali sold inventory on credit to Alan $4000
October 5th Alan paid $3 900 by cheque in full settlement of the invoice
October 7th Alan purchased further inventory on credit for $3700
December 15 - Alan paid $700 cash and informed Ali that he won’t be able to pay the balance due to his
business failure. On the same day Ali wrote off the unpaid amount as irrecoverable debt and closed
Alan’s account.
March 12 2021 Alan paid $1800 to Ali by cheque.
a) Write the journal entries to record the above transactions and prepare Alan’s account,
Irrecoverable debt account and Irrecoverable debt recovered a/c in Ali’s books.
Journal entries

[7]
 Name: …………………………………………………. Class……………………

Alan account

irrecoverable debt a/c

irrecoverable debt recovered a/c

[7]

b) Explain the purpose of making a provision for doubtful debts. [3]

The provision for doubtful debt account is created to reduce

the accounts receivable balance to its net realizable value without having
to credit it. Since it is a contra asset account it has a credit balance as
compared to the debit balance of accounts receivable.

c) Write the journal entry to create a provision for doubtful debts [2]

Record the journal entry by debiting bad debt expense and crediting
allowance for doubtful accounts.
 Name: …………………………………………………. Class……………………

d) What accounting principle is applied in creating provision for doubtful debts [1]

prudence principle