Question

5. When the final accounts are prepared, the Bad Debts Account is closed by a transfer to the:

(A) Profit and Loss Account
(B) Trading Account
(C) Provision for Doubtful Debts Account

(D) Balance Sheet.

Answer 1

(A) is the correct option.

• A profit and Loss Account is a type of financial statement which highlights the companies business activities.
• It can also be called an income or expense statement. It just focuses on the profit and losses of a company. Its main focus is to calculate the profit and losses of a company and keep it in check.
• It is extremely crucial for the smooth running of the business.