Class 11 Accountancy - Chapter Financial Statements - 2 NCERT Solutions | What is meant by provision for doubtful
What is meant by provision for doubtful debts? How are the relevant accounts prepared and what journal entries are recorded in final accounts? How is the amount for provision for doubtful debts calculated?
Provision for doubtful debts is a kind of arrangement about the expected bad debts from the debtors. Generally it is provided after deducting the amount of bad debts from the debtors. In other words provision is made only on good debtors those who have already proven bad, there is no need to make any provision on that. As provision for doubtful debts is made after preparing the trial balance, to record it we need a kind of adjustment entry in this regard we prepare debtors account and provision for doubtful debts account. For recording bad debts, the following journal entry is passed:
Profit and Loss A/c Dr.
To Provision for Doubtful Debts A/c
(Being provision for doubtful debts is created out of current year profits)
Computation of the Amount of Provision for Doubtful Debts As it is given at the end of a trial balance as an adjustment, little other related adjustment may be there for instance bad debts and discount on debtors. In this case provision for doubtful debt will be created after deducting the figure for bad debts out of the debtor figure.
More Questions From Class 11 Accountancy - Chapter Financial Statements - 2
- Q:-
If the rent of one month is still to be paid the adjustment entry will be :
(a) Debit outstanding rent account and Credit rent account.
(b) Debit profit and loss account and Credit rent account.
(c) Debit rent account and Credit profit and loss account.
(d) Debit rent account and Credit outstanding rent account. - Q:-
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(d) Accrued income - Q:-
Rahul’s trial balance provide you the following information :
Debtors Rs. 80,000
Bad debts Rs. 2,000
Provision for doubtful debts Rs. 4,000It is desired to maintain a provision for bad debts of Rs. 1,000
State the amount to be debited/credited in profit and loss account :
(a) Rs. 5,000 (Debit) (b) Rs. 3,000 (Debit)
(c) Rs. 1,000 (Credit) (d) none of these. - Q:-
If the opening capital is Rs. 50,000 as on April 01, 2016 and additional capital introduced Rs. 10,000 on January 01, 2017. Interest charge on capital 10% p.a. The amount of interest on capital shown in profit and loss account as on March 31, 2017 will be :
(a) Rs. 5,250 (b) Rs. 6,000
(c) Rs. 4,000 (d) Rs. 3,000 - Q:-
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- Q:-
If the rent received in advance Rs. 2,000. The adjustment entry will be :
(a) Debit profit and loss account and Credit rent account.
(b) Debit rent account Credit rent received in advance account.
(c) Debit rent received in advance account and Credit rent account.
(d) None of these. - Q:-
What are adjusting entries? Why are they necessary for preparing final accounts?
- Q:-
If the insurance premium paid Rs. 1,000 and prepaid insurance Rs. 300. The amount of insurance premium shown in profit and loss account will be :
(a) Rs. 1,300 (b) Rs. 1,000
(c) Rs. 300 (d) Rs. 700 - Q:-
Give the journal entries for the following adjustments :
(a) Outstanding salary ₹ 3,500.
(b) Rent unpaid for one month at ₹ 6,000 per annum.
(c) Insurance prepaid for a quarter at ₹ 16,000 per annum.
(d) Purchase of furniture costing ₹ 7,000 entered in the purchases book.
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