Mgt101 Gdb 1 Solution Spring 2025

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Understand the basic concepts of write-offs and allowances for doubtful accounts and their impact on financial statements.

Mgt101 Gdb 1 Solution Spring 2025

GDB Question A machine was purchased on November 1, 2025 for Rs. 240,000 from ABC. The estimated service life of this machine, determined by an expert opinion, is 5 years. On the same date, the company has a trade receivables account balance as Rs. 100,000. At the end of the year, the customer invoice was Rs. 20,000 is confirmed as unrecoverable. The company kept a provision for doubtful debts of 5 percent per annum each year. The company closes its books on December 31 of each year. The company’s policy is to charge depreciation on all fixed assets “based on use.

The accountant also ignored the posting of a provision for depreciation and a provision for doubtful debts in the financial statements at the end of 2025, which led to misleading results in the financial statements. As a result, the profit shown in the profit and loss statement at the end of 2025 was Rs.560,000. Mgt101 Gdb Solution 1 Spring 2025

Mgt101 Gdb 1 Solution Spring 2025

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Required:

• What is the amount of depreciation that should be shown as an expense in the income statement for the period ending 2025?
• What is the amount of the trade receivable that should be reported as an asset on the balance sheet as of December 31, 2025?
• Which fundamental accounting principle was violated by NOT reporting the allowance for depreciation and allowance for doubtful accounts on the income statement?
• What will be the correct amount of profit after incorporating the above information?

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