Depreciation and bad debts

I think you need to credit the provision for doubtful debts acc and debit the adjustment acc, this then increases the amount in the provision for bad debts acc to 170 which is the figure you've quoted which is correct.

All of your other entries look fine to me based on the short test that I did.

As for how you deal with the depreciation when writing up the balance sheet you start off with the cost amount of the fixed asset on the left, then in the middle column you have the accumulated depreciation to date (including the adjusted amount that has been added on for the cost of depreciation for this year) and then on the right you have the net which is the cost less dep'n to date.

As for the provision for doubtful debts, this is listed under current assets. You have your debtors amount and then underneath you would write "less provision for doubtful debts". Your debtors figure is adjusted to a lesser amount to allow for the possibility of current debts possibly going bad. The amount that you have increased the provision by would be included on the p and l account as an overhead cost for the year.

Hope that is easy enough to understand. I think thats right.

Sharon

Hi there

Under current assets you would start with closing stock valuation then under that the debtors figure and then underneath that you would quote less provision for doubtful debts (in this case less £170) and the amount you have allowed for this. You would therefore deduct £170 from the debtors figure and then the amount less the £170 would be carried forward to be added to the value of any other current assets ie prepayments, cash etc etc.

The equipment cost would be 58000 but the provision for depreciation wouldn't only be the depreciation cost for this year it would be the provision for depreciation to date so that the balance sheet reflects the true worth of the fixed asset as it has already depreciated over a couple of years and would not be worth any where near as much as the cost price. The provision for depreciation amount to be quoted on the balance sheet would be 27700 and the net would be 30300.

With regard to there being no long term liabilities you would just not need to quote it if there aren't any. You would only have current assets less current liabilities to give you your net current assets(working capital). You would then add this figure to the net value of the fixed assets to obtain the value of the total net assets.

Hope this makes sense.

Sharon

Yep, that's what I had. Good luck.