Solution-Create a provision for doubtful debts

Create a provision for doubtful debts

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Reference no: EM13528261

The following is the Trial Balance of a merchant on Mar 31, 2009

Particulars	Dr. Rs	Cr. Rs
Capital/Drawings	30,000	4,00,000
Opening Stock	37,500	-
Purchases/Sales	7,97,500	11,55,000
Freight on Purchases	12,500	-
Wages (11 months upto Feb 28, 2009)	33,000	-
Salaries	70,000	-
Postage, Telegrams, Telephone	6,000	-
Printing and Stationery	9,000	-
Miscellaneous Expenses	15,000	-
Debtors/Creditors	1,25,000	1,50,000
Investments	50,000	-
Discount Received	-	7,500
Bad Debts	7,500	-
Provision for Bad Debts	-	4,000
Building	15,0000	-
Machinery	2,50,000	-
Furniture	20,000	-
Commission on Sales	22,500	-
Interest on Investments	-	6,000
Insurance (up to Aug 31, 2009)	12,000	-
Bank Balance	75,000	-
	17,22,500	17,22,500

Adjustments

Closing Stock Rs 1,12,500
Machinery worth Rs 22,500 purchased on Oct 1, 2008 was shown as purchases. Freight paid on the machinery was Rs 2,500, which was included in freight on purchases
Commission is payable at 2½ on sales
Investments were sold @ 10% profit but the entire sale proceeds have been taken as sales
Write off bad debts Rs 5,000
Create a provision for doubtful debts at 5% on debtors
Depreciate Building by 2½12; %; Plant and Machinery at 10% p.a. you are required to prepare Trading and Profit and Loss Account for the year ended on Mar 31, 2009 and a Balance Sheet as on that date.

Reference no: EM13528261

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Create a provision for doubtful debts

Reference no: EM13528261

Reference no: EM13528261

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