Question

Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2017

	Rs
Debtors	80,000
Bad debts	2,000
Provision for doubtful debts	5,000

Adjustments:

Bad Debts Rs 500 Provision on Debtors @ 3%.

Answer 1

Profit and Loss Account
Dr.						Cr.
Particulars			Amount Rs	Particulars			Amount Rs
Bad Debts		2,000		Old Provision for Doubtful Debts			5,000
	Add: Further Bad Debts	500
	Add: New Provision for Bad Debts	2,385	4,885
Balancing figure			115
			5,000				5,000

Balance Sheet
Liabilities		Amount Rs	Assets			Amount Rs
			Debtors		80,000
				Less: Further Bad Debts	500
				Less: New Provision on Debtors	2,385	77,115
						77,115

Bad Debts Account
Dr.				Cr.
Date	Particulars	Amount Rs	Date		Particulars	Amount Rs
2017			2017
Dec.31	Balance b/d	2,000	Dec.31		Provision for Doubtful Debts	2,500
	(as per the Trial Balance)
Dec.31	Sundry Debtors	500
		2,500				2,500

Provision for Doubtful Debts Account
Dr.				Cr.
Date	Particulars	Amount Rs	Date		Particulars	Amount Rs
2017			2017
Dec.31	Bad Debts	2,500	Jan.01		Balance b/d (Old Provision)	5,000
Dec.31	Balance b/d	2,385
	(New Provision)
Dec.31	Profit and Loss	115*
	(Balancing Figure)
		5,000				5,000

*Note: In this case, the old provision exceeds the sum total of Bad debts and the New Provision. Thus, the balancing figure is Rs 115 and is calculated as Rs 2,500 + Rs 2,385 – Rs 5,000 = Rs (115)