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The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450?
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The Books of Accounts of Z Ltd. shows that the balance of sundry debto...
The amount of reserve for doubtful debts to be shown in Profit and Loss Account is:
To determine the amount of reserve for doubtful debts to be shown in the Profit and Loss Account, we need to consider the existing balance of sundry debtors, the reserve for doubtful debts, and the additional amount of bad debts that will be incurred.
Given information:
- Balance of sundry debtors: 50,000
- Reserve for doubtful debts: 2,000
- Amount of bad debts: 1,000
- Reserve percentage: 5%
Step 1: Calculate the additional reserve required
The additional reserve required can be calculated by multiplying the amount of bad debts by the reserve percentage:
Additional reserve = Bad debts * Reserve percentage
Additional reserve = 1,000 * 5% = 50
Step 2: Calculate the total reserve for doubtful debts
The total reserve for doubtful debts is the sum of the existing reserve and the additional reserve required:
Total reserve = Existing reserve + Additional reserve
Total reserve = 2,000 + 50 = 2,050
Step 3: Determine the reserve to be shown in the Profit and Loss Account
The reserve to be shown in the Profit and Loss Account is the total reserve minus the existing reserve:
Reserve to be shown = Total reserve - Existing reserve
Reserve to be shown = 2,050 - 2,000 = 50
Therefore, the amount of reserve for doubtful debts to be shown in the Profit and Loss Account is 50. Hence, the correct option is (d) 1,450.
Summary:
To calculate the reserve for doubtful debts to be shown in the Profit and Loss Account, we need to consider the existing reserve, the additional bad debts, and the reserve percentage. By adding the existing reserve and the additional reserve required, we can determine the total reserve. Finally, by subtracting the existing reserve from the total reserve, we can determine the reserve to be shown in the Profit and Loss Account. In this case, the reserve to be shown is 50.
To determine the amount of reserve for doubtful debts to be shown in the Profit and Loss Account, we need to consider the existing balance of sundry debtors, the reserve for doubtful debts, and the additional amount of bad debts that will be incurred.
Given information:
- Balance of sundry debtors: 50,000
- Reserve for doubtful debts: 2,000
- Amount of bad debts: 1,000
- Reserve percentage: 5%
Step 1: Calculate the additional reserve required
The additional reserve required can be calculated by multiplying the amount of bad debts by the reserve percentage:
Additional reserve = Bad debts * Reserve percentage
Additional reserve = 1,000 * 5% = 50
Step 2: Calculate the total reserve for doubtful debts
The total reserve for doubtful debts is the sum of the existing reserve and the additional reserve required:
Total reserve = Existing reserve + Additional reserve
Total reserve = 2,000 + 50 = 2,050
Step 3: Determine the reserve to be shown in the Profit and Loss Account
The reserve to be shown in the Profit and Loss Account is the total reserve minus the existing reserve:
Reserve to be shown = Total reserve - Existing reserve
Reserve to be shown = 2,050 - 2,000 = 50
Therefore, the amount of reserve for doubtful debts to be shown in the Profit and Loss Account is 50. Hence, the correct option is (d) 1,450.
Summary:
To calculate the reserve for doubtful debts to be shown in the Profit and Loss Account, we need to consider the existing reserve, the additional bad debts, and the reserve percentage. By adding the existing reserve and the additional reserve required, we can determine the total reserve. Finally, by subtracting the existing reserve from the total reserve, we can determine the reserve to be shown in the Profit and Loss Account. In this case, the reserve to be shown is 50.
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The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450?
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The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450?.
The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450?.
Solutions for The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is 50,000 and reserve for doubtful debts is 2,000. Later, the management of the company realized that debts to the extent of 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in Profit and Loss Account is: (a) 2,500 (b) 2,350 (c) 2,450 (d) 1,450? in English & in Hindi are available as part of our courses for CA Foundation.
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