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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Overstatement and understatement of allowances
Hi, I came across this question and couldn’t understand the reason behind the answer given.
1. A review of pre year end correspondence with customers to identify any disputed balances.
A. Overstatement of allowances
B. Understatement of allowances
Answer given is B. Why is this so?
Seems to me could be either A or B. The client could have made a 100 % allowance for a bad debt, but the correspondence could show that the customer was willing to pay, say 50%.