a debtor of rs.6000 declare insolvent & liquidator has declared that 0.60 paisa will be paid against rs.1 outstanding. provide for bad debts reserve @ 5% p.a.
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Answer:
Bad-debt a/c debit Rs 2400 Credit Debtors A/c Rs 2400
Explanation:
As debtors already declared insolvent. It is clear that Rs 2400 ( Rs 6000 X 0.40) is bad --debt and can not be recovered.
Provide for @ 5 % for Bad-debt reserve is irrelevant as already provided for bad-debt and other debtors details not provided.
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