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Question

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

Sundry Debtors80,500Bad debts1,000Provision for bad debts5,000Additional InformationBad DebtsRs. 500

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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Solution

Dr Bad Debts Account Cr

DateParticularsJFAmt. (Rs)DateParticularsJFAmt. (Rs)20052005Dec 31 Balance b/d 1,000Dec 31 ProvisionDec 31 Debtors 500for Bad DebtsA/c 1,500 ¯¯¯¯¯¯¯¯¯¯¯¯¯1,500–––– ¯¯¯¯¯¯¯¯¯¯¯¯¯1,500––––

Dr Provision for Bad Debts Account Cr

DateParticularsJFAmt. (Rs)DateParticularsJFAmt. (Rs)20052005Dec 31 Bad Debts 1,500Dec 31 Balance b/d 5,000Dec 31 Profit &Loss A/c 1,900Dec 31 Balance c/d(80,500 - 500)(@2%=1,600) 1,600 ¯¯¯¯¯¯¯¯¯¯¯5000––– ¯¯¯¯¯¯¯¯¯¯¯5000–––

Dr Profit and Loss Account Cr

DateParticularsJFAmt. (Rs)DateParticularsJFAmt. (Rs)2005 Dec 31 Provision forBad Debts A/c 1,900


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