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Business Studies

EBIT-EPS Analysis

In the trial ...

Question

In the trial balance are shown Debtors Rs. 2400, Bad Debts Rs 221, Bad Debts Reserve Rs 324. For creating a Reserve for Doubtful Debts @ $10 %$ on debtors, the P & L A/c will be debited by :

A

137

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B

240

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C

343

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D

9

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Solution

The correct option is A 137
New reserve to be created = 2,400 x 10/100
= RS-240.
P & L A/c to be debited ;-
= New reserve - (Old reserve - Bad debts)
= 240 - (324 - 221)
= 240 - 103
= Rs-137.

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