McqMate
| Q. |
Debtors are valued at ________________ |
| A. | realizable value |
| B. | as per articles of association |
| C. | book value |
| D. | decided by the customer |
| Answer» C. book value | |
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Rahul kumawat
3 years ago
Please explain this answer
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Muhammad Ahmed Awan
4 weeks ago
Correct Answer: A. Realizable Value
Explanation:
Debtors (also called Accounts Receivable) are valued at their realizable value, which means the amount of money expected to be collected from them.
This is in accordance with the prudence (or conservatism) principle in accounting, which states that anticipated losses should be recognized, but not anticipated gains.
If there is any doubt that a debtor might not pay, the company should make a provision for doubtful debts and reduce the value of debtors accordingly.
So, if total debtors are Rs. 100,000 and Rs. 5,000 are expected to be uncollectible, the realizable value would be Rs. 95,000.
Explanation:
Debtors (also called Accounts Receivable) are valued at their realizable value, which means the amount of money expected to be collected from them.
This is in accordance with the prudence (or conservatism) principle in accounting, which states that anticipated losses should be recognized, but not anticipated gains.
If there is any doubt that a debtor might not pay, the company should make a provision for doubtful debts and reduce the value of debtors accordingly.
So, if total debtors are Rs. 100,000 and Rs. 5,000 are expected to be uncollectible, the realizable value would be Rs. 95,000.
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