Provision for Discount on Debtors Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

adjustment for provision for discount on
debtors provision for discount on
lettuce how do you create a provision
for discount on debtors in the same way
as we create a provision for doubtful
debts we say profit and loss account
debit to provision for discount on
lettuce this is how we will create a
provision for discount on debtors how
does it appear in the in the final
accounts since profit and loss account
is being debited profit and loss account
is debited for the amount of provision
for discount that we are creating now
what is this provision for discount on
debtors whenever we get money from our
customers for early payment of this
money we may allow them some kind of
discount if we have a certain balance of
methyls good debtors and we expect that
that some amount of our discount will be
offered to them discount when we offer
to our customer it is a loss for us
since we expect this to happen in the
future we may make a provision for it
called provision for discount on
Deafness how do we create the provision
by debiting profit and loss account and
crediting the provision for a doubtful
debts so in the final accounts provision
for month out so that sorry provision
for discount on debtors provision for
this downturn debtors so profit and loss
account is debited with the amount of
discount that needs to be created and
how else will it be shown in the balance
sheet in the balance sheet when we show
debtors less we had already done mind
you bad debts less we might do new
provision for doubtful debts
this is deducted this is deducted and
then we also did up the new provision
for discount on the
this is how the debtors would be shown
finally in the balance sheet debtors
that bad debts would be removed the
provision for doubtful debts would be
removed and the provision for discount
on debtors would be removed if there is
discount expense such discount expense
candy would be adjusted against the
provision for discount on debtors
instead of taking to the profit and loss
account because the provision was
created in order to meet the discount
expense so the entry for transferring
the discount account to discount account
to provision instead of profit and loss
would be provision for discount on
debtors provision for discount on
debtors debit to discount account so
discount account to customer and this
discount needs to be transferred to the
profit and loss account can be
transferred to the provision for
discount on debtors account provided
such a provision exists provision at the
percentage so sometimes this provision
for discount on debtors is not given as
a lump sum amount
but it is computed as a percentage on
the that is what do we take as a
percentage on debtors would mean debtors
less but that's less new provision for
doubtful debts so you have debtors you
have less bad debts you have less
provision for doubtful debts balance the
amount you get here you charge a
percentage of this so let us say 2%
on this figure would be the amount off
this would be the amount of discount on
provision for discount on dentists
debtors less bad debts less provision
for doubtful deaths the balance that we
get the discount would be computed on
that balance and how does it appear in
the balance sheet like we discussed
before betters less bad debts less new
provision for doubtful debts less new
provision for discount or debtors this
is how it appears in the balance sheet
but please remember when it is provided
at a percentage we take this percentage
on debtors less bad debts less new
provision for doubtfulness this is
because if a debt is doubtful we really
don't expect an early payment from this
debtors and discount providing for
discount on debtors is nothing but
providing for a discount which we would
allow for an early payment of cash from
customers only receipt of cash from
customers sundry letters of message
Sunol brothers amounts to 45,000 and bad
beds 5,000 they provide for doubtful
deaths and the rate of 5% and for
discount at the rate of 1% the amount of
net debtors to be shown in the balance
sheet will be a 40 mm 323 be 37 thousand
600 see forty-two thousand three hundred
and D 37 thousand 620
letters 45,000 less bad deaths 5,000
then doubtful deaths could be at the
rate of 5% so new provision for doubtful
deaths at the rate of 5% would be 2,000
so now we have 38 thousand less discount
provision for discount on letters at the
rate of 1% that is 380 so let debtors
which will be shown in the balance sheet
would be thirty seven thousand six
hundred and twenty correct answer should
be D thirty seven thousand six hundred
and twenty bulk amount of net debtors in
the balance sheet new provision for
discount was computed on debtors less
bad death the provision for so if the
provision for doubtful death is computed
on debtors less Baghdad and the
provision for discount on debtors is
computed all the debtors less bad debts
less provision for doubtful debts after
we deduct on the net balance we compute
the provision for discount all dentists
so correct answer d 37 620