Qualification > Commerce

accounts doubt~~AS level!!

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~cornelia~:
its a multiple choice question...tell me how we get the answer!?

the trail balance of a business at 31 may 2004 included,
Debtors- $13400(Dr)  and Provision for doubtful debts -$730(cr)

at 31 may 2004 it was found that the debtors included a bad debt of-$650. it was decided to adjust the  provision for doubtful debts at 4% of debtors. a debt of $420, which had been written off on jan 2003 was recovered on jan 2004.

what is the effect of these events on the P&L account for the year ended 31 may 2004??
a. Cr $10
b. Dr $10
c. Cr $36
d. Dr $36

lastgift:
Is this a past paper?
 ???

My answer came out to be 'B'. If its correct I can explain it.

~cornelia~:
^no its not pastpaper...its from the text book!

omg.yes! the answer is B...please tell me how? ???

Dasith:
Debtors @ 31 may 2004 (13,400 - 650) =12750

Provision required @ 31 MAy 2004= 12750 x 4/100 =510
Balance in PFDD a/c =                                       =730

Provision needs to be reduced(credited in p/l) by(730-510) =  220 cr
Bad debts for the year                                                  = 650 dr (expense)
Bad debts recovered                                                     = 420 cr(income)

Net figure to be debited in P/L                                        =10 dr

lastgift:
There you go, explained.

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