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

On 31 March, a trader's trial balance shows sundry debtors of Rs 2,00,000. Further bad debts of Rs 10,000 are to be written off, and a provision for doubtful debts of 5% on the remaining debtors is to be created. How will debtors appear in the balance sheet?

Debtors are shown at a net Rs 1,80,500. Writing off Rs 10,000 bad debts leaves Rs 1,90,000, and a 5% provision of Rs 9,500 on that balance is deducted. The provision must be calculated after the write-off, not on the original Rs 2,00,000.

  1. ARs 1,80,500Correct
  2. BRs 1,90,000
  3. CRs 1,81,000
  4. DRs 1,90,500

Explanation

Debtors after bad debts = 2,00,000 - 10,000 = 1,90,000. Provision = 5% of 1,90,000 = 9,500. Net debtors = 1,90,000 - 9,500 = 1,80,500. Rs 1,81,000 wrongly makes the provision on Rs 2,00,000 less bad debts only partly.

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