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Question
The following are the extracts from the trial balance.
Sundry debtors ₹ 30,000; Bad debts ₹ 5,000
Additional information:
(a) Write off further bad debts ₹ 3,000.
(b) Create 10% provision for bad and doubtful debts.
You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.
Ledger
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Solution
Adjusting Entries
| Particulars | L.F. | Debit ₹ | Credit ₹ |
| Bad debts A/c Dr. To Sundry debtors A/c (Bad debts written off) |
3,000 | 3,000 | |
| Profit and loss A/c Dr. To Provision for bad and doubtful debts A/c (Provision for bad and doubtful debts @ 10%) |
2,700 | 2,700 |
Profit and Loss Account
Dr. Cr.
| Particulars | ₹ | ₹ | Particulars | ₹ |
| To Bad debts (TB) | 5,000 | 10,700 | ||
| Add: Further bad debts (adjusted) | 3,000 | |||
| 8,000 | ||||
| Add: Provision for bad and doubtful debts |
2,700 |
Balance Sheet
| Liabilities | ₹ | Assets | ₹ | ₹ |
| Sundry debtors | 30,000 | 24,300 | ||
| Less: Bad debts | 3,000 | |||
| 27,000 | ||||
| Less: Provision for bad and doubtful debts @ 10% |
2,700 |
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