Question
A business had always made a provision for doubtful debts at the rate of 4% of debtors. On
1 January 20X8 the provision for this, brought forward from the previous year, was £320.
During the year to 31 December 20X8 the bad debts written off amounted to £680.
On 31 December 20X8 the remaining debtors totalled £16,800 and the usual provision for
doubtful debts is to be made.
You are to show:
(a) The Bad Debts Account for the year ended 31 December 20X8.
(b) The Provision for Doubtful Debts Account for the year.
(c) Extract from the Profit and Loss Account for the year.
(d) The relevant extract from the Balance Sheet as at 31 December 20X8

Question

jonaslusato jonaslusato

03-01-2024
Business

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Question
A business had always made a provision for doubtful debts at the rate of 4% of debtors. On
1 January 20X8 the provision for this, brought forward from the previous year, was £320.
During the year to 31 December 20X8 the bad debts written off amounted to £680.
On 31 December 20X8 the remaining debtors totalled £16,800 and the usual provision for
doubtful debts is to be made.
You are to show:
(a) The Bad Debts Account for the year ended 31 December 20X8.
(b) The Provision for Doubtful Debts Account for the year.
(c) Extract from the Profit and Loss Account for the year.
(d) The relevant extract from the Balance Sheet as at 31 December 20X8

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varshaoman2020 varshaoman2020 · Answer 1 · 2024-01-03T09:12:15+01:00

Answer:

Certainly! Let's go through each part:

### (a) Bad Debts Account for the year ended 31 December 20X8:

```

Bad Debts Account

Particulars | Debit (£) | Credit (£)

---------------------------|--------------|--------------

To Provision b/f | - | 320

To Bad Debts Written Off | 680 | -

---------------------------|--------------|--------------

Total | 680 | 320

```

### (b) Provision for Doubtful Debts Account for the year:

```

Provision for Doubtful Debts Account

Particulars | Debit (£) | Credit (£)

---------------------------|--------------|--------------

To Bad Debts Written Off | - | 680

To Provision c/f | 140 | -

---------------------------|--------------|--------------

Total | 140 | 680

```

### (c) Extract from the Profit and Loss Account for the year:

```

Profit and Loss Account

Particulars | Debit (£) | Credit (£)

---------------------------|--------------|--------------

Bad Debts Written Off | 680 | -

---------------------------|--------------|--------------

Total | 680 | -

```

### (d) Relevant extract from the Balance Sheet as at 31 December 20X8:

```

Balance Sheet

Liabilities | £ | Assets | £

---------------------------|--------------|---------------------------|--------------

Current Liabilities: | | Current Assets: |

Provision for Doubtful | 140 | Debtors | 16,800

Debts | | Less: Provision for | 140

---------------------------|--------------| Doubtful Debts |

Total | 140 |---------------------------|--------------

| | Total Current Assets | 16,660

```

Please note that the remaining debtors (£16,800) are shown net of the provision for doubtful debts (£140) in the Current Assets section of the Balance Sheet. The Bad Debts Written Off (£680) is reflected as an expense in the Profit and Loss Account. The Provision for Doubtful Debts is adjusted for the Bad Debts Written Off during the year.