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CMA Intermediate · Financial Accounting · Final Accounts of Commercial Organisations

Sharma Traders has the following balances at year end: Trade receivables Rs 4,80,000 (includes Rs 30,000 debts considered bad but not yet written off); provision for doubtful debts is to be maintained at 5% of good debtors. Opening provision was Rs 12,000. Ignoring other items, what amount of trade receivables (net) will be shown in the balance sheet?

Net trade receivables are Rs 4,27,500. Bad debts of Rs 30,000 are removed first, leaving good debtors of Rs 4,50,000, and a 5% provision of Rs 22,500 is then deducted. The opening provision only affects the profit and loss charge.

  1. ARs 4,27,500Correct
  2. BRs 4,50,000
  3. CRs 4,26,000
  4. DRs 4,57,500

Explanation

Good debtors = 4,80,000 - 30,000 = 4,50,000. Provision at 5% = 22,500. Net receivables = 4,50,000 - 22,500 = 4,27,500. Rs 4,57,500 wrongly gives 5% on the gross 4,80,000 less... and 4,50,000 ignores the provision.

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