Sundary debtors on 31st march,2005 are Rs1,05,000. Further bad dept are Rs5,000 ,sales return recorded in the book Rs10,000 .old provision for bad dept is Rs4,000. provision fot doubtful dept is to be made on debtor @ 10% and also provision of discount is to be made on debtor @ 3%.What will be the amount of bad dept charged in profit &loss A/c after considering provision for bad dept?
A)2700 B)10,000 C)12,700 D)6,000
1,05,000 - 5,000 -10,000 is the sundry debtors account for the sake of calculation of provision for bad debts. (bad debt written off and when sales are returned the debtor will not be liable to pay his debts as he returned the goods and sundry debtors will be reduced by the amount of sales return). amount on which provision should be charged is 90,000. 10% of 90,000 is 9,000. so S.d on which discount for debtors must be charged is 90,000 - 9,000 = 81,000. discount on debtors = 0.03*81,000 = 2,430 so total bad debts charged to profit and loss A/c is 9000+2430+5000-4000 = 12,430. 12,430 is charged to P&L A/c. however if discount on debtors is charged against the 90,000 then discount on debtors will be 0.03 * 90,000 = 2700 so total bad debt charge will be 9000+2700+5000-4000 = 12700 and c will be the answer
that woud mean they did not debit the discount on debtors as a part of bad debt but was debited to P&L seperately. so the bad debts will be 9000+5000-4000= 10,000. discount on debtors 2,430 will be most probably debited seperately
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