CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship
The trial balance of Ms. Kavita Rao shows Debtors ₹2,00,000 and Provision for doubtful debts ₹8,000 (old). Adjustments: bad debts ₹5,000 are to be written off and a provision of 5% on debtors is to be maintained. The total charge to the Profit and Loss Account for bad debts and provision is:
The total charge is ₹6,750. Bad debts of ₹5,000 are written off, leaving debtors of ₹1,95,000. The new 5% provision is ₹9,750, and since ₹8,000 already exists, only ₹1,750 more is charged. Adding the two gives ₹6,750.
- A₹6,750Correct
- B₹14,750
- C₹5,000
- D₹10,000
Explanation
Debtors after write-off = 2,00,000 - 5,000 = 1,95,000. New provision at 5% = 9,750. Old provision is 8,000, so additional provision = 1,750. Total charge = 5,000 + 1,750 = 6,750. ₹14,750 wrongly adds the full new provision and ignores the old.
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