Question

X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share of profits. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at ₹ 76,000 and ₹ 8,000 respectively. ₹ 6,000 of the debtors proved bad. A provision of 5% is to be created on Sundry Debtors for doubtful debts. Pass the necessary Journal entries.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bad Debts A/c	Dr.		6,000
	To Debtors A/c				6,000
	(Bad debts incurred)
	Provision for Doubtful Debts A/c	Dr		6,000
	To Bad Debts A/c				6,000
	(Bad debts adjusted)
	Revaluation A/c  (WN 1)	Dr.		1,500
	To Provision for Doubtful Debts A/c				1,500
	(Provision created)
	X’s Capital A/c	Dr.		900
	Y’s Capital A/c	Dr.		600
	To Revaluation A/c				1,500
	(Loss on revaluation transferred to Partners’ Capital A/c)

Working Notes:

WN1: Calculation of Provision for Doubtful Debts
Provision to be Created = ( 76,000 - 6,000 ) x `5/100` = Rs. 3,500

Old Provision = Rs. 2,000.
New Provision to be Created = 3,500 - 2,000 = 1,500.