Question

The following are the extracts from the trial balance.

Particulars	Debit ₹	Credit ₹
Sundry debtors	50,000
Provision for doubtful debts		5,000
Bad debts	3,000

Additional information:

(a) Additional bad debts ₹ 3,000.

(b) Keep a provision for bad and doubtful debts @ 10% on sundry debtors.

You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.

Answer 1

Adjusting Entries

Date	Particulars	L.F.	Debit ₹	Credit ₹
	Bad debts A/c   Dr.   To Sundry debtors A/c (Bad debts writte off)		3,000	3,000
	Provision for bad and doubtful debts A/c    Dr.   To Bad debts A/c (Bad debts transferred to provision for bad and doubtful debts A/c) (3000 + 3000)		6,000	6,000
	Profit and loss A/c  Dr.   To Provision for bad and doubtful debts A/c (Provision for bad and doubtful debts created)		5,700	5,700

Profit and Loss A/c

Dr.					Cr.
Particulars		₹	₹	Particulars	₹
To Bad debts (TB)		3,000	5,700
Add: Additional bad debts		3,000
		6,000
Add: New provision for doubtful debt		4,700
		10,700
Less: Old provision for bad and doubtful debts		5,000

Balance Sheet

Liabilities	₹	Assets	₹	₹
		Sundry debtors	50,000	42,300
		Less: Additional Bad debts	3,000
			47,000
		Less: New provision for bad and doubtful debts	4,700