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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)
Firstly, Dr. Debtors Account 29,400
Dr, Discount Allow (2%) 600
Cr. Sales 30,000
To recognised the Bad debt in SOI
Secondly. Dr. Bad Debt 300
Cr. Debtors Account 300
For the provision:
Dr. Bad Debt (5%) 1500
Cr. Allowance for doubtful debt (5%) 1500
It was a good question my dear. Hope i answer your question correctly
I agree with Mr. Venkitaraman Krishna Moorthy. he narrated the answer with a clear views.
For Bad debts write off : Bad Debts A/c Dr 300/-
To Sundry Debtors 300/-
For the Provision for Bad Debts:
(Deduct bad debt from debtors to find new provision)
P & L A/c Dr 1485
To Provision for Badebt 1485
(30,000-300 *5%)
Provision for Discount on Debtors:
(Deduct bad debts, provision for bad debt from sundry debtors and make the provision for the good debts)
P&L A/c Dr 564.30
To Provision for Discount on debtors 564.3
Bad Debts 300 (P&L)
To Debtors (XYZ) 300 (Balance Sheet)
Provision (30,000-300*5%)
To Provision for Bad Debts1,485 (Profit & Loss)
To Provision for Bad Debts1,485 (Balance Sheet)
Discount (30,*2%)
Discount allowed564.30 (P&L)
To Debtors (XYZ) 564.30 (Balance Sheet)
BAD DEBT AC -DEBIT300
PRO FOR BAD DEBTS AC- CREDIT300
Dr. Cr,
1) Provision for bad debts 1485
to Debtors 1485
2) Discount Allowed 564.30
To Debtors 564.30
DR CR Bad debt PL Exp Sundry debtors BL
DR CR Bad debt PL Exp Provision for bad debt BL
DR CR Discount on debt PL Exp Sundry debtors BL
BAD DEB AC DR.300
TO DEBTORS .300/-
2-PROFIT AND LOSS AC DR1485
TO PROVISSION FOR DD 1485
3-DISCOUNT AC DR594
TO DEBTORS594