Examkin

Question

Difficulty: EasyAdjustments for Bad Debts and Provision for Doubtful Debts

At 31st December 2025, a sole trader's trial balance showed Trade Debtors of ₦50,000. Additional bad debts of ₦2,000 are to be written off, and a provision for doubtful debts is to be created at 5% on the remaining trade debtors. What is the net trade debtors figure to be presented in the Statement of Financial Position?

Answer: 45600 ₦

Answer

The net trade debtors figure to be presented in the Statement of Financial Position is ₦45,600.
To calculate net trade debtors for the Statement of Financial Position, first subtract the ₦2,000 additional bad debts from the gross debtors of ₦50,000 to get ₦48,000 adjusted debtors. Next, calculate 5% of ₦48,000, which gives a provision for doubtful debts of ₦2,400. Subtracting ₦2,400 from ₦48,000 yields the net debtors figure of ₦45,600.

Step-by-Step Solution

1
Deduct the additional bad debts from gross trade debtors
Adjusted Debtors = ₦50,000 - ₦2,000 = ₦48,000
Bad debts identified at year-end must be written off against gross debtors first before calculating the required percentage provision.
2
Calculate the 5% provision for doubtful debts on the adjusted debtors balance
Provision = 5% × ₦48,000 = ₦2,400
The provision for doubtful debts is estimated based on the net collectible debtors.
3
Deduct the provision for doubtful debts from the adjusted debtors balance
Net Debtors = ₦48,000 - ₦2,400 = ₦45,600
Net debtors are reported in the Statement of Financial Position after subtracting the provision for doubtful debts.

Key Concept

Adjustment for bad debts written off and provision for doubtful debts in final accounts
Rate this question

Topics

Adjustments for Bad Debts and Provision for Doubtful Debts

More questions from this topic