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Question
The following are the extracts from the trial balance.
| Particulars | Debit ₹ | Credit ₹ |
| Sundry debtors | 50,000 | |
| Provision for doubtful debts | 5,000 | |
| Bad debts | 3,000 |
Additional information:
(a) Additional bad debts ₹ 3,000.
(b) Keep a provision for bad and doubtful debts @ 10% on sundry debtors.
You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.
Solution
Adjusting Entries
| Date | Particulars | L.F. | Debit ₹ | Credit ₹ |
| Bad debts A/c Dr. To Sundry debtors A/c (Bad debts writte off) |
3,000 | 3,000 | ||
| Provision for bad and doubtful debts A/c Dr. To Bad debts A/c (Bad debts transferred to provision for bad and doubtful debts A/c) (3000 + 3000) |
6,000 | 6,000 | ||
| Profit and loss A/c Dr. To Provision for bad and doubtful debts A/c (Provision for bad and doubtful debts created) |
5,700 | 5,700 |
Profit and Loss A/c
| Dr. | Cr. | ||||
| Particulars | ₹ | ₹ | Particulars | ₹ | |
| To Bad debts (TB) | 3,000 | 5,700 | |||
| Add: Additional bad debts | 3,000 | ||||
| 6,000 | |||||
| Add: New provision for doubtful debt | 4,700 | ||||
| 10,700 | |||||
| Less: Old provision for bad and doubtful debts | 5,000 | ||||
Balance Sheet
| Liabilities | ₹ | Assets | ₹ | ₹ |
| Sundry debtors | 50,000 | 42,300 | ||
| Less: Additional Bad debts | 3,000 | |||
| 47,000 | ||||
| Less: New provision for bad and doubtful debts |
4,700 |
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RELATED QUESTIONS
What are accrued incomes?
Give the adjusting entries for interest on capital and interest on drawings.
Explain the accounting treatment of bad debts, provision for doubtful debts, and provision for discount on debtors.
Pass adjusting entries for the following:
- The closing stock was valued at ₹ 5,000
- Outstanding salaries ₹ 150
- Insurance prepaid ₹ 450
- ₹ 20,000 was received in advance for commission.
- Accrued interest on investments is ₹ 1,000.
For the fol owing adjustments, pass adjusting entries:
- Outstanding wages ₹ 5,000.
- Depreciate machinery by ₹ 1,000.
- Interest on capital @ 5% (Capital: ₹ 20,000)
- Interest on drawings ₹ 50
- Write off bad debts ₹ 500
The trial balance on March 31, 2016, shows the following:
Sundry debtors ₹ 30,000; Bad debts ₹ 1,200
It is found that 3% of sundry debtors is doubtful of recovery and is to be provided for. Pass journal entry for the amount of provision and also show how it would appear in the profit and loss account and balance sheet.
The following are the extracts from the trial balance.
Sundry debtors ₹ 30,000; Bad debts ₹ 5,000
Additional information:
(a) Write off further bad debts ₹ 3,000.
(b) Create 10% provision for bad and doubtful debts.
You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.
The following trial balance was extracted from the books of Arun Traders as of 31st March 2018.
| Particulars | Debit | Credit |
| Buildings | 17,500 | |
| Plant and machinery | 12,000 | |
| Cash purchases | 30,000 | |
| Credit purchases | 8,500 | |
| Sales | 63,250 | |
| Bills receivable | 6,750 | |
| Coal and water | 1,625 | |
| Office expenses | 5,250 | |
| Rent received | 1,750 | |
| Carriage outwards | 2,875 | |
| Repairs and maintenance | 500 | |
| Wages | 9,250 | |
| Debtors and creditors | 9,000 | 8,500 |
| Cash | 2,000 | |
| Capital | 44,750 | |
| Opening stock | 13,000 | |
| 1,18,250 | 1,18,250 |
Prepare trading and profit and loss account for the year ending 31st March, 2018 and balance sheet as on that date after considering the following:
- Depreciate Plant and machinery @ 20%
- Wages outstanding amounts to ₹ 750.
- Half of the repairs and maintenance paid is for the next year.
- Closing stock was valued at ₹ 15,000.
Following are the ledger balances of Devi as on 31st December, 2016.
| Debit balance | ₹ | Credit balance | ₹ |
| Purchases | 35,000 | Goodwill | 40,000 |
| Salaries | 11,750 | Sundry debtors | 20,500 |
| Drawings | 4,500 | Furniture | 31,000 |
| Opening Stock | 6,250 | General expenses | 3,250 |
| Capital | 50,000 | Commission received | 2,750 |
| Sales | 78,500 | Loan | 44,000 |
| Carriage inwards | 21,800 | Cash at bank | 3,100 |
| Bad debts | 600 | Provision for bad debts | 2,500 |
Prepare trading and profit and loss account for the year ended 31st December, 2016 and balance sheet as on that date.
- Stock on 31st December, 2016 ₹ 5,800.
- Write off bad debts ₹ 500.
- Make a provision for bad debts @ 5%.
- Provide for discount on debtors @ 2%.
Prepare trading and profit and loss account and balance sheet from the following trial balance of Madan as of 31st March 2018.
| Debit balance | ₹ | Credit balance | ₹ |
| Sundry debtors | 61,000 | Capital | 70,000 |
| Plant and machinery | 80,000 | Purchases return | 2,000 |
| Bank charges | 4,200 | Sales | 2,55,000 |
| Wages | 7,000 | Bank overdraft | 77,000 |
| Sales return | 5,000 | ||
| Purchases | 1,52,000 | ||
| Opening stock | 30,000 | ||
| Drawings | 22,000 | ||
| Establishment expenses | 20,000 | ||
| Bad debts | 800 | ||
| Business premises | 22,000 | ||
| 4,04,000 | 4,04,000 |
Adjustments:
- The closing stock was ₹ 80,000
- Provide depreciation on plant and machinery @ 20%
- Write off ₹ 800 as further bad debts
- Provide the doubtful debts @ 5% on sundry debtors.
