Provision for bad debts are created by ____________ profit and loss account.

Adding

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Deducting

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Debiting

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Crediting

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Solution

The correct option is C Debiting
This provision is created by debiting the Profit and Loss Account for the period. The nature of various debts decides the amount of Doubtful Debts. The amount so debited in the Profit and Loss Account and an Account named “Provision for Doubtful Debts Account” is credited with the amount.

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Similar questions

The following information are extract from the trial balance of M/s Nisha traders on 31 December, 2005.

$\begin{matrix} Sundry Debtors & 80, 500 Bad debts & 1, 000 Provision for bad debts & 5, 000 Additional Information Bad Debts & Rs. 500 \end{matrix}$

Provision is to be maintained at 2 % of Debtors.

Prepare bad debts account, Provision for bad debts account and Profit and Loss account.

From the following trial balance, prepare trading account, profit and loss account for the year ended 31st December, 2016.

$\begin{matrix} Particulars & Amt. (Rs.) & Particulars & Amt. (Rs.) Opening Stock & 10, 000 & Sales & 5, 20, 000 Purchases & 3, 00, 000 & Purchases Returns & 10, 000 Debtors & 1, 40, 000 & Creditors & 1, 00, 000 Drawings & 20, 000 & Provision for Bad Debts & 4, 000 Sales Returns & 16, 000 & Bills Payable & 30, 000 Wages & 24, 000 & Bank Overdraft & 20, 000 Salaries & 40, 000 & Capital & 7, 20, 000 Repairs & 12, 000 Bad Debts & 8, 000 Carriage & 4, 000 Discount & 6, 000 Land and Building & 4, 00, 000 Plant and Machinery & 3, 00, 000 Furniture and Fixtures & 80, 000 Cash & 4, 000 Goodwill & 40, 000 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 14, 04, 000 - --------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 14, 04, 000 - --------- - \end{matrix}$

Adjustments:

(i) Closing stock Rs. 40,000

(ii) Further bad debts Rs. 6,000.

(iii) Create a provision for doubtful debts @ 5%.

(iv) Create a provision for discount on debtors and creditors @ 2%.

(v) Change depreciation on plant and machinery and furniture and fixtures @ 10% per annum.

Q. The entry for creating a provision for bad debts is ___________.

Q. The entry for creating a provision for bad debts is:

Rahul's trial balance provide you the following information:

$\begin{matrix} Debtors & R s . 80, 000 Bad debts & R s . 2, 000 Provision for bad debts & R s . 4, 000 \end{matrix}$

It is desired to maintain a provision for bad debts of Rs. 1,000. State the amount to be debited/credited in profit and loss account.

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