BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total assets and total liabilities decreases by that amount.
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Total liabilities and capital decreases by that amount.
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Total assets and capital decreases by that amount.
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Total assets, total liabilities and capital decreases by the amount.
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Detailed explanation-1: -Writing off a loan essentially means it will no longer be counted as an asset. By writing off loans, a bank can reduce the level of non-performing assets (NPAs) on its books. An additional benefit is that the amount so written off reduces the bank’s tax liability.
Detailed explanation-2: -Write-off of a debt is an accounting action that results in reporting the debt/receivable as having no value on the agency’s financial and management reports. The agency does not need DOJ approval to write-off a debt since the agency is only adjusting its accounting records.
Detailed explanation-3: -It means the debt has gone unpaid so long that creditors have assigned it a bad debt status. When an account is charged off, the creditor writes it off as a financial loss. The account is closed and the debt may be sold to a debt buyer or transferred to a collection agency.
Detailed explanation-4: -Writing off a loan implies that it will no longer be counted as an asset. It is used in situations involving non-performing assets (NPA) or bad loans. A bank can reduce the number of NPAs on its books by writing off loans. An extra advantage is that written-off reduces the bank’s tax liability.
Detailed explanation-5: -Reporting a bad debt expense will increase the total expenses and decrease net income. Therefore, the amount of bad debt expenses a company reports will ultimately change how much taxes they pay during a given fiscal period.