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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of Sole Proprietorship

Meera Textiles has debtors of ₹2,00,000 before adjustments, and the trial balance shows an old provision for doubtful debts of ₹6,000. Further bad debts of ₹10,000 are to be written off, and the provision is to be maintained at 5% on the remaining debtors. What is the total amount charged to the Profit and Loss Account for bad debts and provision?

Debtors after writing off bad debts are ₹1,90,000, so the new provision is ₹9,500. After setting off the old ₹6,000, the extra ₹3,500 plus ₹10,000 of bad debts gives ₹13,500 charged to Profit and Loss.

  1. A₹9,500
  2. B₹13,500Correct
  3. C₹19,500
  4. D₹16,000

Explanation

Debtors after write-off = 2,00,000 - 10,000 = 1,90,000. New provision at 5% = 9,500. Additional provision = 9,500 - 6,000 = 3,500. Total charge = 10,000 + 3,500 = 13,500. Option 19,500 adds the full new provision and ignores the old one's credit balance.

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