my question of the week
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as per......arguement with tutor.....<BR><BR>on 1 january 1999 there is a balance on a business's provision for doubtful debts account of £1,460. at 31 December 1999 the balance on the debtors control account is £42,570.of this it is decided that £370 should be written off as a bad debt and a provision for doubtful debts of 4% is required against the remainder.<BR>At 31st december 2000 the debtors total was £38,400 of which £400 is to be written off as a bad debt. A provision for doubtful debts of 4% of the remainder of the debtors is required.<BR><BR>Write up the bad debts expense account and the provision for doubtful debts account for 1999 and 2000.<BR><BR>Answers on a postcard thread please...........
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my question of the week
The first thing you need to do is to write off the bad debt by crediting the debtors control account with £370 and debiting the bad debts accounts with the £370. This will leave a debtors balance of £42,200, which a provision of 4% for bad debts would be £1,688. There is already a provision of £1,460 so the difference of £228 needs to be debited to the bad debts adjustments accounts and credited to the provision account. This will sort out the adjustments for the year end 31st dec 99.<BR><BR>The second year 31st Dec 2000 you need to credit the debtors control account with £400, and debit the bad debts account with £400. This will leave a new balance of £38,000 on the debtors control account, which a 4% provision of £1,520 needs to be made. The current provision is as per the previous year end £1,688 and so needs to be reduced to the new provision by £168. This is done by debiting the provision account with £168, and crediting the adjustment for bad debts account with £168.<BR><BR>All you have got to remember then is that when drawing up the final accounts both the bad debts and bad debt adjustment accounts are transferred to the profit and loss account. The bad debts account will always be a debit and so reduce profits, but the adjustments account can either be a debit, when there is an increase in the provision, or a credit and increase profits when the provision is reduced. The provision for doubtful debts is a balance sheet account under current liabilities.<BR><BR>Hope this helps and sorts out anything your not sure about, until next week anyway!0 -
my question of the week
Hi Craigy<BR>Loved your explanation if you fancy doing my homework just give us a shout
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my question of the week
thanks craigy....brilliant!!!<BR><BR>nicky....be quick cos theres a queue forming!! :-)0 -
my question of the week
well i dont mind aslong as it helps.....just waiting for someone to help me out with mine now! lol0