Question

The following are the extracts from the trial balance.

Particulars	Debit ₹	Credit ₹
Sundry debtors	50,000
Discount on debtors	2,000
Bad debts	3,000

Additional information:

(a) Create a provision for doubtful debts @ 10% on sundry debtors.

(b) Create a provision for discount on debtors @ 5% on sundry debtors.

You are required to pass necessary adjusting entries and show how these items will appear in the final accounts.

Answer 1

Adjusting Entries

Particulars	L.F.	Debit ₹	Credit ₹
Profit and loss A/c  Dr.   To Provision for bad & doubtful debts A/c (10% provision made)		5,000	5,000
Profit and loss A/c  Dr.   To Provision for discount on debtors A/c (5% discount on debtors made)		2,250	2,250

Profit and Loss Account

Dr.					Cr.
Particulars		₹	₹	Particulars	₹
To Bad debts		3,000	8,000
Add: Provision for bad and doubtful debts		5,000
To Discount on debtors		2,000	4,250
Add: Provision for discount on debtors		2,250

Balance Sheet

Liabilities	₹	Assets	₹	₹
		Sundry debtors	50,000
		Less: Provision for bad and doubtful debts	5,000
			45,000
		Less: Provision for discount on debtor	2,250	42,750