Question

Bad debt reserve on debtors is to be reduced by 5%. In balance sheet debtors 20000 - B.D.R 2000 =18000 is given.

Answer 1

1. Bad Debts A/c Dr 300

To Sundry Debtors 300

(To Write off Bad Debts)

2. Profit and Loss A/c Dr 1485

To Provision for Bad and Doubtful Debts 1485

(Provision @5% of Debtors after writing off Bad Debts)

3. Profit and Loss A/c Dr. 565

To Provision for Discount on Debtors 565

(Provision @2% of Debtors after allowing Bad Debts and Provision for Bad Debts)

Profit and Loss account will be debited with:

1. Bad Debts: 300

2.Provision for Bad and Doubtful debts: 1485

3.Provision for Discount on Debtors: 565

In the Balance Sheet

Debtors will appear as:(30000 less300 less1485 less565 =27650)