Provision for bad-debts as on 1.4.08 Rs. 1,000, during the year 2008-09 there were no bad-debts and debtors as on 31.3.09 were Rs. 90,000. Provision for bad-debts required @ 1% which of the following journal Entry will be passed on 31.3.09?a)P andamp; L A/c Dr. 100To Provision for Doubtful debts 100b)Provision for Doubtful debts Dr. 100To Pandamp;L A/c 100c)P andamp; L A/c Dr. 900To Provision for Doubtful debts 900d)No entry will be passed.Correct answer is option 'B'. Can you explain this answer?

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Commerce Exam > Commerce Questions > Provision for bad-debts as on 1.4.08 Rs. 1,00...

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a)
P & L A/c Dr. 100

To Provision for Doubtful debts 100
b)
Provision for Doubtful debts Dr. 100

To P&L A/c 100
c)
P & L A/c Dr. 900

To Provision for Doubtful debts 900
d)
No entry will be passed.

Correct answer is option 'B'. Can you explain this answer?

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Provision for bad-debts as on 1.4.08 Rs. 1,000, during the year 2008-0...

At the beginning of the year provision for bad debts is Rs. 1000 and at the closing date of year total provision to be made only for Rs. 900 ( 1% of debtors = 1% of 90000 = Rs. 900 ) here provision for bad debts is made extra amounted to Rs. 100. (provision made - provision to be made) so this extra 100 Rs. that had been transferred to provision for bad debts A/c will be transferred to P & L A/c. and consequently entry will be ; DR. provision for bad debts A/c. CR. P & L A/c by RS 100

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Provision for bad-debts as on 1.4.08 Rs. 1,000, during the year 2008-0...

To calculate the required provision for doubtful debts as of 31.3.09:

Given:

Provision for bad debts as on 1.4.08 = Rs. 1,000
During the year 2008-09, there were no bad debts.
Debtors as on 31.3.09 = Rs. 90,000
Provision for bad debts required @ 1%

Step-by-step calculation:

Calculate the required provision for doubtful debts as on 31.3.09: Provision required = 1% of Debtors as on 31.3.09 = 1% of Rs. 90,000 = Rs. 900
Determine the adjustment needed in the provision account:
- Opening balance of Provision for bad debts (1.4.08) = Rs. 1,000
- Required provision as on 31.3.09 = Rs. 900
- Adjustment required = Rs. 900 - Rs. 1,000 = Rs. -100 (a decrease in provision)

Journal entry to adjust Provision for Doubtful Debts on 31.3.09:

The provision is being reduced, so we credit Provision for Doubtful Debts.

Option 2 correctly represents this adjustment:

Provision for Doubtful debts Dr. 100 To P&L A/c 100

This entry reflects the decrease in the provision for bad debts from the opening balance to the required amount as of the end of the period. Therefore, Option 2 is the correct journal entry to pass on 31.3.09.

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Provision for bad-debts as on 1.4.08 Rs. 1,000, during the year 2008-09 there were no bad-debts and debtors as on 31.3.09 were Rs. 90,000. Provision for bad-debts required @ 1% which of the following journal Entry will be passed on 31.3.09?a)P & L A/c Dr. 100To Provision for Doubtful debts 100b)Provision for Doubtful debts Dr. 100To P&L A/c 100c)P & L A/c Dr. 900To Provision for Doubtful debts 900d)No entry will be passed.Correct answer is option 'B'. Can you explain this answer?

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