Provision for bad debts is calculated on __________.

creditors

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sales

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purchases

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debtors

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Solution

The correct option is D debtors
Provisions are created by debiting the profit and loss account. In the balance sheet, the amount of provision may be shown by the way of deduction from the concerned asset on asset side. For e.g. provision for doubtful debts is shown as deduction from the amount of sundry debtors and provision for depreciation as a deduction from the concerned fixed asset.

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Similar questions

5 %

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.

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