WAEC Accounting 2019 Theory — Question 1

Model answer

(a) Increase in provision for doubtful debt: An increase in the provision for doubtful debt means that the doubtful debts of the current year has increased compared with the previous year. Thus, this is an emphasis to the business. The accounting treatment in the final account goods thus: Dr Profit and loss account with the increase; Cr Debtors account with the increase. (b) Decrease in provision for doubtful debt: A decrease in provision for doubtful debt means that the doubtful debts of the current year has decreased compared with doubtful debt of the previous year. This is an income to the business e.g. in 2017, the doubtful debt was estimated at N300 but in 2018 it was estimated that the premiums N300 doubted has reluctant to N250. This is an income to the business. Thus, the accounting treatment is: Dr Debtors account with the decrease; Cr Profit and loss account with the decrease. (c) Provision for discount on debtors: This is the allowance based on some percentage allowed debtors as deduction from their total debts. It could be caused or used to influence quick payment or quantity purchase. The provision is a relief to the debtors and an expense to the business, thus the accounting treatment is: Dr Profit and loss account; Cr Debtors account. (d) Provision for discount on creditors: This is the allowance based on some percentage allowed by creditors to the organization. It could be to facilitate quick payment. It is an income to the organization, thus the accounting treatment is: Dr Creditors account; Cr Profit and loss account. (e) Provision for depreciation: This can be defined as an allowance made for replacement of fixed asset as a result of wear and tear. It is an expense to the organisation, thus the accounting treatment in the final account is: Dr Profit and loss account; Cr Asset account.