Which of the following can be most relevant to calculation of allowance for doubtful debts?

Q. Which of the following can be most relevant to calculation of allowance for doubtful debts?
(A) Total credit sales
(B) Total credit purchases
(C) Total current assets
(D) Total current liabilities

The answer is: (A) Total credit sales
Allowance for doubtful debts are calculated usually on the basis of receivables. However, second most reliable amount is of credit sales as debt arises because of credit sales and then the chance of recoverability is calculated.
← Previous Question
Home: Accounting MCQs