43. X,Y and Z are partners in the firm in
the ratio of 4:3:2.On firms dissolution -
total assets 70000; creditor are
15000. Realisation expense are 2100.
Assets realised 15% more than the book
value. Creditors are paid at 2% more. What
amount of profit or loss on realisation will
be debited or credited to Y's Capital A/c?
Answers
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
Explanation:
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