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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%.

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Solution

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)


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