Accounting Online Program Certification Practice Test

What is the total operating expense after adjusting for irrecoverable debts?

1. £22,400

2. £24,200

3. £26,000

4. £28,000

The correct answer is: £24,200

To determine the total operating expense after adjusting for irrecoverable debts, it is crucial to first identify what constitutes operating expenses and how irrecoverable debts affect them. Operating expenses typically include costs necessary for running the business, such as rent, utilities, salaries, and other administrative expenses. Irrecoverable debts, or bad debts, need to be accounted for because they represent amounts that the company does not expect to collect. Adjusting for irrecoverable debts involves subtracting these debts from the overall total of receivables or gross revenues, thus allowing for a more accurate representation of expenses related to operations. In this scenario, if the correct adjustment yields a total operating expense of £24,200, it suggests that other operating expenses are accounted for correctly and align with the overall financial picture even after incorporating the adjustment for debts deemed irrecoverable. The figure of £24,200 demonstrates a balance that reflects the impact of uncollectible accounts without overstating the company's financial health. The other options would represent total operating expenses that either misaccount for the irrecoverable debts or inaccurately aggregate other expenses, leading to an imprecise figure that does not align with the adjusted accounts. Hence, choosing £24,200 signifies an accurate assessment