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Question
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a 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.
Solution
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Journal |
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Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
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Bad Debts A/c |
Dr. |
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6,000 |
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To Debtors A/c |
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6,000 |
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(Bad debts incurred) |
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Provision for Doubtful Debts A/c |
Dr |
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6,000 |
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To Bad Debts A/c |
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6,000 |
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(Bad debts adjusted) |
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Revaluation A/c (WN 1) |
Dr. |
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1,500 |
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To Provision for Doubtful Debts A/c |
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1,500 |
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(Provision created) |
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X’s Capital A/c |
Dr. |
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900 |
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| Y’s Capital A/c | Dr. | 600 | |||
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To Revaluation A/c |
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1,500 |
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(Loss on revaluation transferred to Partners’ Capital A/c) |
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Working Notes:
WN1: Calculation of Provision for Doubtful Debts
Provision to be Created = ( 76,000 - 6,000 ) x `5/100` = Rs. 3,500
Old Provision = Rs. 2,000.
New Provision to be Created = 3,500 - 2,000 = 1,500.
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