Question

X and Y are partners sharing profits in the ratio of 3 : 2. They admitted Z as a new partner for 1/4th share of profits. At the time of admission of Z Debtors and Provision for Doubtful Debts appeared at ₹ 76,000 and ₹ 8,000 respectively. ₹ 6,000 of the debtors proved bad. A provision of 5% is to be created on Sundry Debtors for doubtful debts. Pass the necessary journal entries.

Answer 1

Solution:

                                                   Journal  

Sr. No.         Particulars                         Debit Rs.                  Credit Rs.

(i)             Bad Debts A/c             Dr.      6,000

                      To Debtors A/c                                               6,000

         (Being bad debts incurred)  

(ii)  Provision for doubtful debts A/c Dr.  6,000

               To Bad Debts Ale                                                  6,000

        (Being bad debts adjusted)  

(iii)         Revaluation A/c           Dr.            1,500

                    To Provision for doubtful debts A/c                1,500

                    (Being provision created)

(iv)           X's Capital A/c            Dr.           900

             Y's Capital A/c              Dr.           600

                      To Revaluation A/c                                            1,500  

    (Being loss on revaluation transferred to partners' capital A/c)

Working Notes:

1. Calculation of provision for Doubtful Debts  

Provision to be created = (76,000- 6,000)x $\frac{5}{100}$ =  3,500

Old Provision = 2, 000

New Provision (to be created)= 3,500 - 2,000 = 1,500