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Zorluk: OrtaProvision for Discounts on Debtors and Creditors

The ledger of Tunde & Co. shows a Trade Debtors balance of 120,000\text{₦}120,000 at the end of the accounting period. Additional information reveals that bad debts of 5,000\text{₦}5,000 are to be written off, a Provision for Doubtful Debts is to be maintained at 5%5\% on net debtors, and a Provision for Discount on Debtors is to be created at 2%2\%. What is the amount of the new Provision for Discount on Debtors to be created?

Cevap: 2185

Cevap

The amount of the new Provision for Discount on Debtors is 2,185\text{₦}2,185.
The provision for discount on debtors must be calculated on good debtors. Starting with gross debtors of 120,000\text{₦}120,000, subtracting bad debts of 5,000\text{₦}5,000 leaves 115,000\text{₦}115,000. Deducting the 5%5\% provision for doubtful debts (5,750\text{₦}5,750) gives net good debtors of 109,250\text{₦}109,250. Applying 2%2\% to 109,250\text{₦}109,250 results in 2,185\text{₦}2,185.

Adım Adım Çözüm

1
Deduct bad debts written off from gross trade debtors
Net debtors before provision = 120,0005,000=��115,000\text{₦}120,000 - \text{₦}5,000 = \text{��}115,000
Bad debts are irrecoverable and must be removed from trade debtors before calculating provisions.
2
Calculate the Provision for Doubtful Debts
Provision for Doubtful Debts = 5%×115,000=5,7505\% \times \text{₦}115,000 = \text{₦}5,750
Provision for doubtful debts is based on net debtors after bad debts are written off.
3
Deduct provision for doubtful debts to determine eligible good debtors
Eligible debtors balance = 115,0005,750=109,250\text{₦}115,000 - \text{₦}5,750 = \text{₦}109,250
Discounts are only estimated for good debtors who are expected to pay promptly, excluding doubtful accounts.
4
Calculate the Provision for Discount on Debtors
Provision for Discount on Debtors = 2%×109,250=2,1852\% \times \text{₦}109,250 = \text{₦}2,185
Apply the discount rate to the net eligible debtors balance.

Anahtar Kavram

Calculation Sequence for Provision for Discount on Debtors
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