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How to treat the provision for bad debts which appear on
credit side of the p&L A/c.
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Answer Posted / surya kumar
At the first step the provision for doubtful debt should be
shown on the debit side of the frofit & loss account
correspondingly on the liability side of the Balance Sheet
(normally it is being netted off against Sundry Debtors for
disclosure purpose). After 2-3 years when the organisation
feels that there is no chance of recovery then the
provision shoud be written off against the amout
recoverable from debtors .
The case is just reverse in case of sundry creditors ,
whose demand is int acknowledge or whose whereabout is not
known.
| Is This Answer Correct ? | 11 Yes | 2 No |
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please answer this question.the following balances were extracted from the books of modern traders on 31st dec,2010.capital(85000)fixed assets(45000)stock1-1-2010(15000)sundry debtors(20600)productive exp(3300)reserves fund(6600)discount received(800)cash in hand(6200)drawing(5000)accomulated dep.(9000)purchases(82000)bad debts(400)unproductive exp.(27400)sundry creditors(9000)sales(120000)cash at bank(25500).adjustments.stock on 31-12-2010(15000).outstanding wages (5000) write-off (600)of further bad debts. create provision for bad & doubtful debts at {5%) on debtors.unproductive expenses includes anitem of prepaid insurance (100).provide depreciation on original cost of fixed assets @ (10%).
