Question

What does this statement-DEBTORS ARE ALL GOOD" means?What adjustments should be done about this statement in revaluation account as well as in balance sheet?Given that debtors=19000 with (less) provision for doubtful debts=2000.

Answer 1

Hey! Debtors are all good means that there is no bad debts occurred. All money was received from debtors so now we don't need for the provision for doubtful debts so the provision for doubtful debts is posted on the credit side of the revaluation A/c and simply do what you do with the revaluation Means distribute the profit or loss calculated... N remember to do not show the provision for doubtful debts again in the new balance sheet coz all the money was received from debtors...
HOPE THIS WILL HELP YOU SOMEHOW!!

Answer 2

Debtors are all good is made after the provision has been created, then neither the revaluation account nor the balance sheet need to be adjusted. The provision must be made and charged to the profit and loss account, lowering the value of debtors on the balance sheet, if the statement is produced before the provision is formed.

The phrase "Debtors are all good" indicates that the business anticipates receiving payment for all debts owing by its clients and that no bad debts need to be written off.

It is crucial to remember that even if a statement is confidently stated, it does not necessarily imply that the debts are actually "excellent" or that there is no chance of nonpayment.

To account for the likelihood of some customers not paying their bills, it is conventional accounting procedure to set a provision for doubtful debts.

In the hypothetical situation, the business has already set aside 2000 dollars for potentially dubious debts, against the creditors' remaining total of 19,000.

This indicates that the debtors' net realizable value is 17000 (i.e., 19000 - 2000).

In summary, it is important for companies to exercise caution and create provisions for doubtful debts even if they believe that all of their debtors are good. This will help to ensure that the company's financial statements accurately reflect the risks and uncertainties associated with the debtors.

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