Question

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

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

Provision is to be maintained at 2 % of Debtors.

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

Answer 1

$\begin{array}{ccc}\text{Dr}& \text{Bad Debts Account}& \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ \text{2005}& & & & 2005& & & \\ \text{Dec 31}& \text{Balance b/d}& & 1,000& \text{Dec 31}& \text{Provision}& & \\ \text{Dec 31}& \text{Debtors}& & \text{500}& & \text{for Bad Debts}& & \\ & & & & & \text{A/c}& & \text{1,500}\\ & & & \overline{\underset{–}{1,500}}& & & & \overline{\underset{–}{1,500}}\end{array}$

$\begin{array}{ccc}\text{Dr}& \text{Provision for Bad Debts Account}& \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ \text{2005}& & & & 2005& & & \\ \text{Dec 31}& \text{Bad Debts}& & 1,500& \text{Dec 31}& \text{Balance b/d}& & \text{5,000}\\ \text{Dec 31}& \text{Profit}\&& & & & & & \\ & \text{Loss A/c}& & \text{1,900}& & & & \\ \text{Dec 31}& \text{Balance c/d}& & & & & & \\ & \text{(80,500 - 500)}& & & & & & \\ & (@2\%=1,600)& & \text{1,600}& & & & \\ & & & \overline{\underset{–}{5000}}& & & & \overline{\underset{–}{5000}}\end{array}$

$\begin{array}{ccc}\text{Dr}& \text{Profit and Loss Account}& \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ & & & & 2005& & & \\ & & & & \text{Dec 31}& \text{Provision for}& & \\ & & & & & \text{Bad Debts A/c}& & \text{1,900}\\ & & & & & & & \end{array}$