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Provision for Bad and Doubtful Debts.

In trial balance

Sundry debtors....Rs62000 (including B Madans dishonored bill of Rs1000)

1. Half of B Madans dishonored bill is to be written off
2. Provision for doubtful debts is created 5%on debtors

    Then provision for bad debt is created on what amount  is there on Rs61500
asked Mar 3, 2017 in Trial Balance, Profit & Loss Account and Balance Sheet by Aditya (8 points) 701 views

1 Answer

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Dear Aditya, we have to make a provision of 5% for doubtful debts.  In case of Madan's dishnoured cheque, it is given that 50% of amount due from him is unrecoverable, this also means balance 50% (Rs.500) is recoverable.  This means on Madan's Rs.1000 we need not make any provision.  So the provision is to be created only on Rs.61000.  You must remember that first you have to put an entry for writing of Rs.500 from Sundry Debtors (Madan's A/c).  In the Balance Sheet Sundry Debtors will be shown at Rs.60500 and Provision for Doubtful Debts will be shown at Rs.3050 (Rs.61000 x 5%).

Bad Debts A/c       Dr.     500

   To Sundry Debtors                             500

Profit & Loss A/c   Dr.   3050

   To Provision for Doubtful Debts     3050
answered Mar 4, 2017 by jbsclasses (3,971 points)
selected Mar 4, 2017 by Aditya
Than you for solving my problem Sir
 But there's a little confusion
That provision is created on Rs 61000 then how is provision amount to be Rs 3000  I think prov. Is Rs 3050
 And in balance sheet sundry debtors is calculated
By subsracting bad debts Rs500 and could  we subtract provision also
Dear Aditya,  u are right, it was a typing error, I have made the correction above.