Examkin

Soru

Zorluk: KolayCreation and Adjustment of Provision for Doubtful Debts

At the end of the financial year, Kalu Traders has Trade Debtors of ₦75,000\text{₦}75,000 and an existing Provision for Doubtful Debts of ₦1,500\text{₦}1,500. If bad debts of ₦5,000\text{₦}5,000 are written off and the provision for doubtful debts is to be adjusted to 5%5\% of the remaining debtors, what amount (in ₦\text{₦}) will be charged to the Profit and Loss Account for provision for doubtful debts?

Cevap: 2000 ₦

Cevap

The amount to be charged to the Profit and Loss Account for provision for doubtful debts is ₦2,000\text{₦}2,000.
The net trade debtors figure after writing off bad debts is ₦70,000\text{₦}70,000 (₦75,000−₦5,000\text{₦}75,000 - \text{₦}5,000). The new provision required is 5%5\% of ₦70,000=₦3,500\text{₦}70,000 = \text{₦}3,500. Subtracting the existing provision balance of ₦1,500\text{₦}1,500 gives an increase of ₦2,000\text{₦}2,000, which is debited as an expense in the Profit and Loss Account.

Adım Adım Çözüm

1
Deduct bad debts written off from total trade debtors
Net Trade Debtors = ₦75,000−₦5,000=₦70,000\text{₦}75,000 - \text{₦}5,000 = \text{₦}70,000
Provision for doubtful debts is calculated on net trade debtors after deducting bad debts written off.
2
Calculate the new required provision for doubtful debts
New Provision = 5%×₦70,000=₦3,5005\% \times \text{₦}70,000 = \text{₦}3,500
The required percentage is applied to the remaining trade debtors figure.
3
Calculate the adjustment amount for the Profit and Loss Account
Profit and Loss Charge = ₦3,500−₦1,500=₦2,000\text{₦}3,500 - \text{₦}1,500 = \text{₦}2,000
Only the net increase in provision is charged as an expense to the Profit and Loss Account.

Anahtar Kavram

Adjustment of Provision for Doubtful Debts
Bu soruyu puanla

Konular

Creation and Adjustment of Provision for Doubtful Debts

Bu konudan daha fazla soru