E T B I C MBA AGU

How to add Bad debt increased in Trial Balance, Please show the answer in Trial Balance

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asked Jun 5, 2016 in Trial Balance, Profit & Loss Account and Balance Sheet by Shaws (19 points) 227 views
edited Jun 11, 2016 by Shaws

1 Answer

0 votes

In case of any doubts, please don't hesitate to discuss further.

answered Jun 6, 2016 by jbsclasses (3,967 points)
Can you show the trial as well Sir after adjustment.
Since this adjustment involves Profit and Loss A/c, it cannot be shown in Trial Balance.

Can i make the Trial Balance like below Sir?  As i have to prepare the adjusted Trial Balance. Is it  correct Sir.
 

 

Trial Balance
         Dr Cr
Debtors    2,886,173.53  
Provision for Doubtful Debtors    0
Bad Debts Increased To     98,191.60  

 

Yes, You can prepare the adjusted trial balance after the first journal entry.  The above Trial Balance will be OK.

Or else can i do the entry as below instead of all those entries as you mentioned

Bad Debts                                     Dr                       98191.60
Provision for Doubtful Debts     Cr                       98191.60

 

                                                                        Trial Balance
         Dr Cr
Debtors    3,086,173.53  
Provision for Doubtful Debts    200,000
Bad Debts Increased To     98,191.60  
 

Is this wrong or right Sir?

You cannot pass the entry you suggested.  I will tell you the reason.  Let us understand this with the help of an example.  Mr. A runs a business.  He has supplied goods worth Rs.10000 to Mr.B on credit.  Later if Mr. B becomes bankrupt and is not able to pay his debt.  For Mr. A it is a complete loss.  Now Mr. A has to remove from his books Mr. B's name and recognise a loss of Rs.10000.  For this purpose he will have to pass the following journal entry:

Bad Debts A/c         Dr.  10,000

   To B's A/c                                      10,000

Next point is where to close Bad Debts A/c.  If you have Provision for Bad Debts A/c, you can close Bad Debts A/c into that.  Otherwise you have to close it to Profit & Loss A/c.
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