Explanation:

Trade Receivables:
- The trial balance shows trade receivables at Rs. 23,390
- This means that the company is owed this amount by its customers for goods or services provided
- However, this amount may not be fully recoverable as some customers may default on their payments

Provision for Doubtful Debts:
- A provision for doubtful debts is an estimate of the amount of trade receivables that are unlikely to be collected
- This provision is made to account for potential bad debts in the future
- The provision is usually calculated as a percentage of the trade receivables
- In this case, the provision for doubtful debts should be maintained at 10% of the trade receivables

Credit Provision for Bad Debts:
- The trial balance shows a credit balance of Rs. 2,320 for provision for bad debts
- This means that the company has already created a provision for bad debts, but it may not be sufficient

Bad Debt:
- A bad debt is a trade receivable that cannot be collected
- In this case, the company has a bad debt of Rs. 1,560 that has not been written off
- This means that the company is still showing this amount as a trade receivable, even though it is unlikely to be collected

Impact on Financial Statements:
- If the company does not write off the bad debt and does not maintain a sufficient provision for doubtful debts, its financial statements will be overstated
- This means that the company's assets (trade receivables) will be overstated, and its profit will be overstated
- This can lead to incorrect decision-making by stakeholders, such as investors and creditors

Conclusion:
- To avoid overstating its financial statements, the company should write off the bad debt of Rs. 1,560 and create a provision for doubtful debts of Rs. 2,339 (10% of trade receivables of Rs. 23,390 minus the existing provision of Rs. 2,320)

Amount of bad debt = Rs.1560 (Given)
Trade receivables = 10% (Given)
Trial balance = Rs.23390 (Given)
Provision for bad debts = Rs.2320 (Given)
Journal entry - Provision for bad debts Dr.
To Bad debts Cr.
Provision for bad debts = Rs.23390 - Rs.1560 = Rs.21830
Amount of debtors provision = 10% of Rs.21830 = Rs.2183
Balance in the provision account after writing off = Rs.2320 - Rs.2183 = Rs.137
The provision amount will be = Rs.2183 - Rs.137 = Rs.2046