Page 80 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 4: Final Accounts

Notes
Example: The following figures appear in the books of Shri Hanuman Prasad.

Jan 1 Provision for bad and doubtful debts 2,400
Jan 1 Provision for discount on debtors 1,120
Dec 31 Bad debts written off 940
Dec 31 Discount allowed during the year 1,860
Dec 31 Bad debts recovered 50
Dec 31 Debtors Write off further Rs. 480 (definitely bad) 20,120
Create a provision for discount on debtors @ 2% and also for bad and doubtful debts @ 4% you

are required to journalize the above and Prepare Provision for bad and doubtful debts a/c and
provision for discount on debtors a/c and bad debts a/c & discount a/c.
Solution:
Journal Entries
Date Particulars L.F.
Dec 31 Provision for Bad & doubtful debts Dr. 940
To Bad debts a/c 940
Bad debts transferred.
Dec 31 Provision for discount on debtors a/c Dr. 1,860
To Discount allowed a/c 1,860
Discount allowed transferred.
Dec 31 Bad debts Recovered a/c Dr. 50
To Profit & Loss a/c 50
Gain transferred.
Dec 31 Provision for Bad & doubtful debts a/c Dr. 194.40
To Profit & loss a/c 194.40
Excess transferred.
Dec 31 Profit and loss a/c Dr. 377
To Provision on discount on debtors a/c 377
Discount on debtors transferred.

Ledger Accounts
(i) Provision for Bad and doubtful debts a/c

Date Particulars Date Particulars
Dec. 31 To Bad debts a/c 1,420 Jan. 1 By Balance b/d 2,400.00
Dec 31 To P & L a/c 194.40
(Bal. Figure)
Dec. 31 To Balance c/d 785.60
2,400.00 2,400.00

(ii) Bad debts a/c
Date Particulars Date Particulars
Dec 31 To S. debtors a/c 940 Dec 31 By Provision for
Dec 31 To debtors a/c 480 Bad & Doubtful debts a/c 1,420
1,420 1,420

LOVELY PROFESSIONAL UNIVERSITY 75