In relation to the expense associated with the creation of an allowance for doubtful debts,the Australian Taxation Office:
A) Never allows a deduction for taxation purposes for that amount.
B) Allows a deduction for taxation purposes for that amount when it is recognised as an expense.
C) Allows a deduction for taxation purposes immediately.
D) Allows a deduction for taxation purposes only when there is a bad debt written off against a debtors account.
E) Allows a deduction for taxation purposes if the probability of the debt not being repaid is greater than 50 per cent.

Question

Quizplus · Accepted Answer

The Australian Taxation Office allows a deduction for doubtful debts only when the debt is actually written off as bad, not when an allowance is created.

In Relation to the Expense Associated with the Creation of an Allowance