Home For AAT student members AQ 2013 AAT Level 3 (Level 6 in Scotland)

Help with posting bad debts and provision

numberjunkynumberjunky Feels At HomeRegistered Posts: 88
As part of a question I have for homework I need just a little bit of guidance on this. Here's the relevant details before adjustments.

Debtors - 75600
Provision for doubtful debts - 2100

Adjustments.

Bad debt to be written off - 5600
Provision to be 4% of remaining debtors (70000x4%=2800)

I've done journal entries and then written up the T accounts for these.

Journal entries are

Debit - Bad debts 700
Credit - Provision for doubtful debt 700

Debit - Bad debts 5600
Credit - Debtors (SLCA) 5600

Balances B/d
Bad debts a/c - 6300
Provision for DD - 2800
Debtors - 69300 (75600 - 6300) - and this is where the error lies!

NOW HERE'S MY PROBLEM


On the balance sheet I am 2100 out and I know this is because I have not accounted for the existing 2100 Provision. The 700 'increase' in provision is accounted for in the Bad debts account and the 2800 is shown in the Provision account. The difference of the original provision is the issue!
In order that the balance sheet balances, the debtors must obviously be 67200 (75600 -5600 - 2800).
Annoyingly. this is straight forward if I used an ETB but the question wants
all the T accounts.

My questions are - what are the correct entries for the Debtors Account?
How should I deal with the provision correctly?



Hope someone understands my ramblings!

Thanks guys 'n' gals

Comments

  • PhilWPhilW Feels At Home Registered Posts: 36
    You use the Provision for DD and the Provision for DD- Adjustments accounts to increase/decrease the provision, not the Bad Debts account. The Bad Debts account is purely for debts you have written off.
  • numberjunkynumberjunky Feels At Home Registered Posts: 88
    Bad debts problem revisited

    According to my lecturer and the BPP AAT book on page 179 it is perfectly acceptable to post (once initial provision has been made) the opposite entry of a Provision for Doubtful Debts post, to the Bad Debts Account - My problem still lies with my posts to the Debtors Account (SLCA) as when this is balanced off in my workings, the figure is quite clearly wrong.

    To recap
    Debtors - 76500
    Provision for Doubtful Debts - 2100

    Adjustments to be made are....

    Bad Debt Write off - 5600
    Provision of remaining debtors of 4% (7000 x 4% = 2800)

    I have made journal entries and updated the T accounts
    DEBIT - Bad Debts Account 5600
    CREDIT - Debtors 5600

    CREDIT - Provision for Doubtful Debts 700
    DEBIT - Bad Debts Account 700

    The balance on the Provision now correctly shows 2800 but I don't know how to account for this to make the Debtors Account be correct, as I have only included the 700 increase in the Bad Debts Account. To make the the balance sheet balance, the Debtors must show 67200 (75600 - 5600 - 2800)

    It is obvious that if I did this on a ETB, I would simply carry across the totals after any adjustments so Debtors would be 7000, Bad Debts would be 6300 and Provision for DD would be 2800.

    I know where the mistake lies but I can't account for it !
    Damn £2100 !
  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 456
    Hello,

    Your journals look all ok to me,

    Debtors:
    SLCA b/f 75,600
    Less: Bad Debt w/o (5,600)
    SLCA c/f 70,000
    Less Doubtful Debt Prov. (2,800)
    Debtors Per Balance sheet 67,200

    Doubtful Debts Prov:
    Balance b/f 2,100
    Increase Prov. 700
    Bal c/f 2,800

    Bad & Doubtful Debts Expense:
    Bad Debt w/off 5,600
    Increase D.Debt Prov. 700
    Total Expense 6,300

    On the TB Account balances would show:
    Bad & Doubtful Debts Expense Dr 6,300
    SLCA Dr 70,000
    Prov. for Doubtful Debts Cr 2,800

    Hope this is of some use :001_smile:
  • PrinceyPrincey Settling In Nicely Registered Posts: 15
    Hi

    Having a look at your question
    Debtors
    Bal b/d £75600
    Cr Bad Debt £5600 (Debt to be written off)
    Bal c/d £70000

    Bad Debts Expense
    Dr Debtors £5600 (Debt written off)
    Dr Prov for Doubtful Debts £700 (Increase only)
    Bal c/d £6300

    Bad Debt Provision
    Bal b/d £2100
    Cr Prov for Doubtful Debts £700
    Bal c/d £2800

    Therefore Debtors £70000 less Provision a/c of £2800 is £67200
  • numberjunkynumberjunky Feels At Home Registered Posts: 88
    YES YES YES.....Done it

    How damn S-T-U-P-I-D of me. I could clearly see what the figures would be in the balance sheet. I made the FATAL mistake of posting the Bal b/d on the Bad Debts Account (5600+700) to the Debtors account instead of just the Bad Debt of 5600 which would, as you said, give a balance of 7000 (the figure that would be on the balance sheet), this together with the Provision for DD would give me the correct figure of 67200!

    How [email protected]@dy stupid - I knew the method and somehow did something different! Now it all makes sense. Ultimately, what I was INCORRECTLY trying to do was make the Debtors Account Bal b/d be the same as what it would show on the balance sheet AFTER the subtraction of the Provision for DD. Phew!

    Balance sheet extract

    Debtors 70000
    (less Provision for DD) 2800

    67200

    It pays to make mistakes occasionally - but only when you're not being paid.......:blushing:


    CASE CLOSED!
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