Question

The company maintains provision for bad debts at $5\%$ and its outstanding debtors at the end of the year was Rs 3,00,000. During the year, opening balance of provision for bad debt was Rs. 5000 and bad debt during the year was Rs. 10,000. The debit to profit and loss account for the year ended in respect of provision for debtors will be:

• A. Rs. 50,000
• B. Rs. 25,000
• C. Rs. 20,000
• D. Rs. 15,000

Answer 1

The correct option is C Rs. 20,000

New provision = 300000*5/100 = 15000
Old provision = 5000

Bad debts during the year = 10000
Calculation of charge in profit and loss account is : -

New Provision + Bad debts - previous year Provision
= 15000 + 10000 - 5000

= 20000