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This query is : Resolved
K.S.Mugundan
(Querist)
16 August 2011
how to deal with final accounts adjustments regarding bad debts
CA Chitta Ranjan Das
(Expert)
16 August 2011
Go as per the following steps to resolve the issue.
(i) Find the actual Baddebt amount in Trial Balance.
(ii) Find the Top Management decision regarding the percentage of Baddebt to be applied on Debtors.
(iii) Deduct the Baddebt amount from the Provision amount (estimated as ii above).
(iv) the resultant amount of (iii) above is to be transfered to Profit and Loss account.
(v) The entire amount as per (ii) above is to be transfered to Asset side of Balance sheet and to be shown as a deduction from Debtor.
(vi) The above works can be done through ledger account of "Provision for Bad and doubtfull debt Account".
(vii) The necessary disclosure may be made in Notes to Accounts regarding the percentage of Baddebt as finalised by Top Management.
(i) Find the actual Baddebt amount in Trial Balance.
(ii) Find the Top Management decision regarding the percentage of Baddebt to be applied on Debtors.
(iii) Deduct the Baddebt amount from the Provision amount (estimated as ii above).
(iv) the resultant amount of (iii) above is to be transfered to Profit and Loss account.
(v) The entire amount as per (ii) above is to be transfered to Asset side of Balance sheet and to be shown as a deduction from Debtor.
(vi) The above works can be done through ledger account of "Provision for Bad and doubtfull debt Account".
(vii) The necessary disclosure may be made in Notes to Accounts regarding the percentage of Baddebt as finalised by Top Management.
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