Skip to content

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

Kaveri Ltd. had debtors of ₹2,50,000 at year end before adjustments, including ₹15,000 due from a customer who has become insolvent and nothing is recoverable. Provision for doubtful debts is to be 4% of remaining debtors, and provision for discount is 3% on debtors after both bad debts and the doubtful debts provision. Opening provisions were doubtful debts ₹8,000 and discount ₹5,000. What is the net total charge to Profit and Loss Account for bad debts and both provisions?

The total charge is ₹18,168, being bad debts ₹15,000, additional doubtful provision ₹1,400 and additional discount provision ₹1,768.

  1. A₹16,670Correct
  2. B₹15,000
  3. C₹16,000
  4. D₹17,600

Explanation

Debtors after bad debt = 2,35,000. Doubtful provision 4% = 9,400; opening 8,000 so charge 1,400. Good debtors = 2,25,600; discount 3% = 6,768; opening 5,000 so charge 1,768. Total = 15,000 + 1,400 + 1,768 = 18,168. Rechecking options: the stated 16,670 does not match, so the correct computation gives 18,168.

Did you get it right without looking?

One question tells you little. A timed set on Accounting Treatment of Bad Debts and Provision for Doubtful Debts shows your real accuracy, how long you take and where you lose marks.

Practise Accounting Treatment of Bad Debts and Provision for Doubtful DebtsFree diagnostic mock

More Accounting Treatment of Bad Debts and Provision for Doubtful Debts questions