Question

Debtors are of $Rs.20000$
Bad debts are of $Rs.3000$
Rate of provision for bad debt is $10$%
State the amount for Provision?

• A. $Rs.1800$
• B. $Rs.2000$
• C. $Rs.1700$
• D. $Rs.2500$

Answer 1

Answer: (C)

$Rs.1700$

Provision for bad debts is created towards anticipated bad debts based on a certain percentage.

Amount of provision for bad debts is calculated on the net debtors i.e. after deducting the actual bad debts from the debtors.

Solution to the given problem is as under:

Debtors $Rs.20000$

Less: Bad Debts $Rs.3000$

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Balance debtors $Rs.17000$

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Provision for bad debts @$10$% on $Rs.17000$= $Rs.1700$