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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

Ramesh's books show Debtors of ₹2,00,000 on 31 March 2025. Bad debts of ₹10,000 are yet to be written off, and a provision for doubtful debts of 5% on the remaining debtors is to be created. No earlier provision existed. What is the total charge to the Profit and Loss Account for bad debts and provision?

The total charge is ₹19,500. Bad debts of ₹10,000 are written off first, leaving debtors of ₹1,90,000. The 5% provision on this balance is ₹9,500. Adding both gives ₹19,500 debited to the Profit and Loss Account.

  1. A₹9,500
  2. B₹10,000
  3. C₹19,500Correct
  4. D₹20,000

Explanation

Remaining debtors = 2,00,000 - 10,000 = 1,90,000. Provision at 5% = 9,500. Total charge = 10,000 + 9,500 = 19,500. Option 4 applies 5% on 2,00,000 (wrong base), giving 10,000 + 10,000.

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