Question

From the following information, prepare Provision for Doubtful debts Account and show them in the profit and loss account and the Balance sheet :

Additional information :
Sundry debtors include Rs 10,000 recivable from a customer, who has become insolvent. Official Receiver has declared a dividend of 50 paise in a rupee. Manintain a provision for doubtful debts @`5%` on debts .

Answer 1

Note :
Provision for doubtful debts is not created on the bad and good debts. If the above out of Rs 10,000, Rs 5,000 are bad and Rs 5,000 are good debts. Therefore, provision for doubtful debts is calculated on Rs 90,000.