Example_format_provision

Examples: 1 the following information is supplied to you:

Opening balance of provision for doubtful debts account: Rs. 2,000

Closing balance of trade debtors                        : Rs. 20,000

Bad debts written off during the year                         : Rs. 2,000

Provision for doubtful debts to be maintained @ 5%

Bad debts to be written of Rs. 1,000

Required: Provision for doubtful debts account. [Answer: transfer to p/L: 1950]

Note: Bad debt, New Bad debt write off, and New provision for bad debt are Debited ,  Old provision for bad debt given are credited 

Working Note: New provision for bad debt ( Closing Debtors- New Bad Debt) x Given % of provision for bad debt = xxx

Examples: 2 A trader’s book disclosed the balance of provision for doubtful debts account Rs. 16,000 at the beginning of the year. Bad debts written off during the year was Rs. 5000. The Balance of trade debtors at the close of the year was Rs. 40,000. It was decided to maintain a provision for doubtful debts @ 2.5% on trade debtors.

Required: Provision for doubtful debts account. [Answer: transfer to p/L: 10,000]

Examples: 3 The following information is available:

Trial Balance
As on 30^th

Particulars	Debit Rs.	Credit Rs.
Provision for doubtful debts ………		11,500
Trade debtors …………………………….	1,30,000
Bad debts …………………………………….	7,500

Adjustment

• Additional bad debts to be written off Rs. 4,500
• Provision for doubtful debts to be maintained @ 5 % on sundry debtors. 

Required: Provision for doubtful debts account. 

[Answer: transfer to p/L: 6,775]

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