Bad debt write-offs and bad debt provisions

Jaspear

Hi Can somebody help me with this please.

At the financial year end on 31st December 2003, the following items were noted.

• After a review of debtors at the year end, the directors wish to write off debt totalling £4,500.

• The directors also wish to adjust the provision for general bad debt to 3% of the remaining total debtors.

Total debtors at 31 December 2003 are £94,500 and the general bad debt provision at 31 December 2002 is £2,000.


Task

Complete the journals below to record the write-off and the change in provision. No narrative required.

sdv

Firstly you will need to understand a formula and a layout

...............Debtors
less......... write off
equlas ......Net Debtors (shown in the Balance sheet)

Less ........Specific Provision (A)
equals ......Debtors (on which General provision is calculated)
times %.....General Provision (B)

The Total of (A) and (B) = Total Provision required on the BALANCE SHEET

therefore if there is already a balance in the provision account and adjument will be required to either increase or reduce the balance depending on the outcome of the The total provision required.




...............Debtors........................................94 500
less......... write off.........................................4 500
equlas ......Net Debtor...................................90 000

Less ........Specific Provision (A)......................nil......
equals ......Debtors .................................... .90,000
times %.....General Provision (B).@ 3%..........2 700

The Total of (A) and (B) = Total Provision required on the BALANCE SHEET

...........................Nil + 2,700 = 2700 - balance required to c/f next year in B/S
less balance on the a/c..............2000
Adjustment required................. 700

The Journal

credit Provision for Doubtful debt..................700 ( this will take the balance in the account to 2700)
debit doubtful debt expense a/c ........700

Credit SLCA (Debtors) ................................4500
Bad Debt (Write off)........................4500

Jaspear

Hi SDV,

Thanks brill i understand the question more now, thanks again.