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Zorluk: KolayAdjustments for Bad Debts and Provision for Doubtful Debts

At 31 December 2025, a sole trader's books showed Trade Debtors of ₦90,000₦90,000 and an existing Provision for Doubtful Debts of ₦3,000₦3,000. Additional bad debts of ₦10,000₦10,000 are to be written off, and the provision for doubtful debts is to be maintained at 5%5\% of the net trade debtors. What is the net amount to be charged to the Profit and Loss Account for provision for doubtful debts?

  1. ₦1,000₦1,000Cevap
  2. B
    ₦4,000₦4,000
  3. C
    ₦4,500₦4,500
  4. D
    ₦7,000₦7,000

Cevap

The amount to be charged to the Profit and Loss Account for provision for doubtful debts is ₦1,000₦1,000.
The correct answer is ₦1,000₦1,000. First, subtract the additional bad debt of ₦10,000₦10,000 from gross debtors (₦90,000₦90,000) to arrive at net debtors of ₦80,000₦80,000. Next, calculate the new provision balance required (5%5\% of ₦80,000=₦4,000₦80,000 = ₦4,000). Finally, compare the required provision with the existing provision of ₦3,000₦3,000; the increase of ₦1,000₦1,000 is the expense charged to the Profit and Loss Account.

Adım Adım Çözüm

1
Calculate Net Trade Debtors
Net Debtors = ₦90,000−₦10,000=₦80,000₦90,000 - ₦10,000 = ₦80,000
Additional bad debts must be deducted from gross trade debtors before applying the provision percentage.
2
Calculate Required Provision for Doubtful Debts
Required Provision = 5%×₦80,000=₦4,0005\% \times ₦80,000 = ₦4,000
The provision is set at 5%5\% of the remaining net debtors.
3
Determine Net Charge to Profit and Loss Account
Increase in Provision = ₦4,000−₦3,000=₦1,000₦4,000 - ₦3,000 = ₦1,000
Only the difference (increase) between the required provision and the existing provision is charged as an expense.

Anahtar Kavram

Adjustment for Provision for Doubtful Debts
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Konular

Adjustments for Bad Debts and Provision for Doubtful Debts

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