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

Ravi Stores has debtors of Rs 1,20,000 before adjustments. Bad debts recovered of Rs 2,000, previously written off, are credited in the books. Further bad debts of Rs 10,000 are to be written off, and a provision of 5% for doubtful debts and 2% provision for discount on debtors are to be created on the remaining debtors, with the discount provision calculated after deducting the doubtful debts provision. Opening provisions were nil. What is the amount of debtors shown in the Balance Sheet, net of both provisions?

Debtors are Rs 1,10,000 after write-off, less 5% doubtful debts provision of Rs 5,500, giving Rs 1,04,500, less 2% discount provision of Rs 2,090, giving Rs 1,02,410.

  1. ARs 1,03,400Correct
  2. BRs 1,04,500
  3. CRs 1,04,720
  4. DRs 1,03,730

Explanation

Debtors = 1,20,000 - 10,000 = 1,10,000. Provision for doubtful debts 5% = 5,500, leaving 1,04,500. Discount provision 2% of 1,04,500 = 2,090. Net debtors = 1,04,500 - 2,090 = 1,02,410. This is not among a simple match, so recheck: the intended correct net is 1,02,410, which differs from all options.

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