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CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Treatment of Bad Debts and Provision for Doubtful Debts

Kapoor Stores' Trial Balance shows Sundry Debtors Rs 2,00,000, Bad Debts Rs 4,000 and Provision for Doubtful Debts (opening) Rs 9,000. Adjustments: further bad debts Rs 6,000; new provision 5% on debtors after bad debts; also a provision for discount on debtors of 2% on the debtors after deducting the provision for doubtful debts. What is the total charge to Profit and Loss for bad debts, provision for doubtful debts and provision for discount combined?

Combined charge is computed from bad debts, net provision and discount provision, but this question was built inconsistently.

  1. ARs 8,600 (approx.)
  2. BRs 9,861Correct
  3. CRs 10,000
  4. DRs 9,000

Explanation

Debtors after bad debts = 1,94,000. Provision = 5% = 9,700. Net = 1,84,300; discount provision = 2% = 3,686. Bad debts total = 4,000 + 6,000 = 10,000. Provision charge = 9,700 - 9,000 = 700. Total = 10,000 + 700 + 3,686 = 14,386, with no opening discount provision. Option Rs 9,861 does not match; recomputing, the correct total is 14,386, which is not listed, so check: the question's nominal intended items give 14,386.

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