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Provision for doubtful debts

rahul (student) (62 Points)

15 May 2015

opening provision for doubtful debts is 51000. during year 10000 written off as bad debt. closing debtors is 630000.decided that 10% of debtors is to be maintained as provision. calculate closing blc towards provision for doubtful debts and pass journal entry to the provision maintained..

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6 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 15 May 2015

1. Closing balance of sundry debtors = Rs. 6,30,000
.
2. Closing provision for doubtful debts to be maintained @ 10% = Rs. 63,000
.
3. Opening provision for doubtful debts = Rs. 51,000
.
4. Additional provision to be maintained = Rs. 12,000 (2-3)
.
Journal Entry:
.
Profit and Loss A/c ........Dr. 12,000
.
To Provision for doubtful debts 12,000
.
(Being additional provision on doubtful debts maintained @ 10%)
.
- Question from Advanced Accounting, CA-PCC [May 2008]

rahul (student) (62 Points)
Replied 15 May 2015

dont we need to deduct bad debts from debtors...

CMA Poornima Madhava (CMA) (13097 Points)
Replied 15 May 2015

Right, in addition to what is suggested by Deepak, you need to debit ₹10k to provision a/c and credit debtors and increase the provision for current year to this extent.

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rahul (student) (62 Points)
Replied 16 May 2015

so what is the final answer

Jishnu Surendran (Finance Manager) (312 Points)
Replied 16 May 2015

to write off rs.10000 as bad debts...

Provision for Bad debts a/c dr. 10000

To Sundry Debtors a/c 10000

( now closing value of debtors is 620000 )

provide 10 % on closing value

Profit & Loss a/c dr. 21000 ( 62000 - ( 51000 - 10000) )

To Provision for bad debts a/c 21000

Note : considering closing value of debtors rs. 630000 is before bad debt w/off.....if it is considered after write off......then the current year additional provision will be rs. 22000 instead of 21000...........i have difference in opinion with rs. 12000 as additional provision because, after you provide for an expense you can only write off the actual incidence of the same against that provision only......

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Mohit Garg (Chartered Accountant) (50 Points)
Replied 16 May 2015

I m totally agree wid Jishnu Surendran

"to write off rs.10000 as bad debts... Provision for Bad debts a/c dr. 10000 To Sundry Debtors a/c 10000 ( now closing value of debtors is 620000 ) provide 10 % on closing value Profit & Loss a/c dr. 21000 ( 62000 - ( 51000 - 10000) ) To Provision for bad debts a/c 21000 Note : considering closing value of debtors rs. 630000 is before bad debt w/off.....if it is considered after write off......then the current year additional provision will be rs. 22000 instead of 21000...........i have difference in opinion with rs. 12000 as additional provision because, after you provide for an expense you can only write off the actual incidence of the same against that provision only....."

1 Like