Question

4.54
Accountana
Recons
Moli is admitted as a partner on the above date on the following terms:
1. She will pay 10,000 as goodwill for 1/4 share in the profits of the firm.
MOT
figure less a provision of 5 % for bad debts.
Fin
found that there was a liability for accident compensation amount to *2.000
opened
Give ioma
2 The assets are to be valued as under: Plant at 32,000; Stock at 18,000; Debtors at borces
3. It was found that the creditors include a sum of 1,400 which was not to be paid. It was a
4. Moli was to introduce *20,000 as capital and the capital of the other partners were to be
adjusted in the new profit sharing ratio. For this purpose, Current Accounts were to be
to record the above and Balance Sheet after Moli's admission,​

Answer 1

Answer:

ANSWER

Provision for doubtful debts is created as a reserve for any bad debt that occurs. According to company's credit policies and other information, some percentage is fixed over sundry debtors as provision.

In the question sundry debtors balance is 76,000 and provision for doubtful debt is 8,000. We need to pass journal entries for the bad debt that occurred and 5% provision that needs to be maintained.

Bad Debt A/c Dr 6,000

To provision for doubtful debts A/c 6,000

(Transfer of bad debts to provision for doubtful debt A/c)

P&L A/c Dr 1,800

To Provision for doubtful debts A/c 1,800

Notes:- New provision to be created = 5%* 76,000 = 3,800

Add:- Bad debts = 6,000

Less:- Old provision =( 8,000)

Balance provision to be created from P&L = 1,800