Question

Question: The following information is extracted from the Trial Balance of M/s Nisha traders on 31 December 2005.

Sundry Debtors	$80,500$
Bad debts	$1,000$
Provision for bad debts	$5,000$
Additional Information
Bad Debts	Rs$500$

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

Answer
Dr Bad Debts Account Cr

Date	Particulars	JF	Amt. (Rs)	Date	Particulars	JF	Amt.(Rs)
2005 Dec 31	To Balance b/d		$1,000$	2005 Dec 31	By Provision for Bad Debts A/c		$1,500$
Dec 31	To Debtors		$500$
							$1,500$

Dr Provision for Bad Debts Account Cr

Date	Particulars	JF	Amt. (Rs)	Date	Particulars	JF	Amt.(Rs)
2005 Dec 31	To Bad Debts		$1,500$	2005 Dec 31	By Balance b/d		$5,000$
Dec 31	To Profit & Loss A/c		$1,900$
Dec 31	To Balance c/d $(80,500-500)@2\%=1,600$		$1,600$
			$5,000$				$5,000$

Dr Profit and Loss Account Cr

Date	Particulars	JF	Amt.(Rs)	Date	Particulars	JF	Amt. (Rs)
2005 Dec 31	To Net Profit		$1,900$	2005 Dec 31	By Provision for Bad Debts A/c		$1,900$
			$1,900$				$1,900$