Question

C's Trial Balance contains the following information: Bad debts Rs. 4,000, Provision for Doubtful debts Rs. 5,000, Sundry debtors Rs. 25,000. It is desired to create a provision for bad debts at 10% on sundry debtors at the end of the year. Sundry debtors will appear in the Balance Sheet at a figure of:

• A. Rs. 22,500
• B. Rs. 21,000
• C. Rs. 18,000
• D. Rs. 15,500

Answer 1

Answer: (A)

Rs. 22,500

Provision for bad debts is deducted from the amount of sundry debtors in the balance sheet. The amount of provision to be created is 10% of 25000 i.e., 2500. This amount is deducted from the sundry debtors balance to show the actual sundry debtors balance. So the sundry debtors will have 22500 in the balance sheet. Here provision for doubtful debtors is not deducted because the previous year balance of debtors has already excluded the provision for doubtful debts and there is no adjustment regarding it in the current year.