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Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ?
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Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off an...
Profit and Loss Account
- Sales
- Less: Bad Debts
- Net Sales
Balance Sheet
Assets
- Debtors
- Less: Bad Debts Written Off
- Less: Bad Debts Reserve
- Net Debtors
Liabilities
- Bad Debts Reserve
Explanation
The Bad Debts Reserve is a provision made to cover potential losses that may arise from customers who are unable to pay their debts. In this case, the Bad Debts Reserve is Rs. 1000, meaning that the company has already set aside this amount to cover any potential losses.
However, the company has also incurred Bad Debts of Rs. 1000 which need to be written off. This means that the company will no longer expect to receive payment from these customers.
To account for the remaining debtors, the company needs to keep a reserve of 5%. This means that the company will set aside 5% of the remaining debtors as a provision for potential losses.
In the Profit and Loss Account, the Bad Debts are deducted from the Sales to arrive at the Net Sales figure. This reflects the fact that the company is not expecting to receive payment for these debts.
In the Balance Sheet, the Bad Debts Written Off and the Bad Debts Reserve are deducted from the Debtors to arrive at the Net Debtors figure. This reflects the fact that the company is only expecting to receive payment for the remaining debtors after accounting for potential losses.
Finally, the Bad Debts Reserve is shown as a liability on the Balance Sheet, reflecting the fact that the company has set aside this amount to cover potential losses.
Community Answer
Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off an...
Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors
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Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ?
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Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ? for Class 11 2024 is part of Class 11 preparation. The Question and answers have been prepared according to the Class 11 exam syllabus. Information about Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ? covers all topics & solutions for Class 11 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ?.
Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ? for Class 11 2024 is part of Class 11 preparation. The Question and answers have been prepared according to the Class 11 exam syllabus. Information about Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ? covers all topics & solutions for Class 11 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Bad debts reserve 1000 rs. Bad debts 1000 rs. Are to be written off and a reserve of 5% is to be kept on remaining debtors Prepare profit and loss account and balance sheet ?.
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