Question

Rahul's trial balance provide you the following information:

$\begin{array}{cc}\text{Debtors}& Rs.80,000\\ \text{Bad debts}& Rs.2,000\\ \text{Provision for bad debts}& Rs.4,000\end{array}$

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.

Answer 1

Rs 1,000 (Credit)

$\begin{array}{cc}\text{Bad Debts}& 2,000\\ (+)\text{New Provision}& \underset{–}{1,000}\\ & 3,000\\ (-)\text{Old Provision}& \underset{–}{(4,000)}\\ & (1,000)\end{array}$