valuation of shares adjustment ??

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CA Abhishek Singh (Querist)
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14 February 2011 Balance sheet as on 31/12/2005
asset side
Sundry debtors-Rs.40500

Adjustment:shares are to be valued subject to following adjustments.

A general reserve of 10% of total debtors after specific provision for doubtful debts, has been made fo the first time in 2005 accounts.

kindly explain me the effect of above adjustment in Future maintenable profits and in the net assets calculation.

CA bhargava

CA bhargava (Expert)
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15 February 2011 In the given problem, tha actual debtors as on 31/12/2005 are 45,000/-
they have deducted an amount of rs.4500/-(10% of the debtors for RBD(reserve for bad debts)

while calculating the net assets,
take the debtors figure as 45,000/- and deduct from liabilities 4500/-as RBD.

if in the problem it says that the reseve to be maintained in future then take debtors as 45000 and deduct 4500 as RBD.
else take debtors as 45000 only and do not deduct RBD.
it depends up on the problem .and requirement.

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