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SSC Financial and Cost Accounting P-1 QUESTION #6140
Question 1

Which item results in a credit entry in the statement of profit or loss?

  • A reduction in the allowance for irrecoverable debts✔️
  • An increase in the allowance for irrecoverable debts
  • The creation of an allowance for irrecoverable debts
  • The writing off of a trade receivable as irrecoverable
Correct Answer Explanation

Option A is correct.

When the allowance is reduced, the previously charged expense is released: Debit allowance account; Credit statement of profit or loss — effectively increasing profit.

Options B, C, D all result in debit entries (expenses) that reduce profit.