Simpsons ltd profit and loss account for the year ended 31st march 201...
Amount to be Transferred to Provision, Reserve, or Neither
The amount to be transferred to provision, reserve, or neither can be calculated as follows:
1. Transfer to Provision:
- Bad debt written off: $25,000
- Increase in provision for bad debt: $22,000
Total transfer to provision: $47,000
2. Transfer to Reserve:
- Proposed dividend: $73,200
- Retained profit for the year: $22,000
- Liability for tax: $26,400
Total transfer to reserve: $121,600
3. Transfer to Neither Provision nor Reserve:
- Depreciation: $84,500
- This amount is considered an expense and does not fall under provision or reserve.
Explanation:
- The amount for bad debt written off and the increase in provision for bad debt are directly related to the provision for bad debt account. Therefore, the total of $47,000 should be transferred to the provision.
- The proposed dividend, retained profit for the year, and liability for tax are typically transferred to reserves to ensure that the company has enough funds for future use and to meet its financial obligations.
- Depreciation is a non-cash expense that reduces the value of fixed assets over time. It is not related to provision or reserve and should be treated as an expense in the profit and loss account.
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