Question

9. X and Yare partners sharing profits equally. Their Balance Sheet as on 31st March, 2020 is given below:
Assets
X
1,50,000
100,000
Land and Building
Plant and Machinery
Pumiture and Fittings
Stock
Debtors
Less Provision for Doubtful Debts
Bills Receivable
Bank
1,50,000
1,00,000
25,000
75,000
2,50,000
40.000
30,000
75,000
5,000
Sils Payable
70,000
1,30,000
50,000
5,00,000
70,000
30,000
50,000
5,00,000
Z is admitted as a new partner for 1/4th share under the following terms:
Qa) Z is to introduce 1,25,000 as capital
(6) Goodwill of the firm was valued at nil.
(0) it is found that the creditors included a sum of 7,500 which was not to be paid. But it was also
found that there was a liability for Compensation to Workmen amounting to 10,000,
(d) Provision for doubtful debts is to be created @ 10% on debtors.
(@) in regard to the Partners' Capital Accounts, present Fixed Capital Accounts Method is to be converted
into fluctuating Capital Accounts Method.
(0) Bills of 20,000 accepted from creditors were not recorded in the books.
() X provides * 50,000 loan to the business carrying interest @ 10% p.a.
You are required to prepare Revaluation Account Partners' Capital Accounts, Bank Account and the Balance
Sheet of the new firm.
​

Answer 1

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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