Financial Statements - II

In this case, the following journal entries will be recorded : Debit Credit Date Particulars L.F. (a) Bad debts A/c To Sundry debtors (Futher bad debts) (b) Provision for doubtful debts A/c Dr. To Bad debts A/c (Bad debts adjusted against the provision) Profit and Loss A/c , To Provision for doubtful debts A/c , (Amount charges from profit and loss account) Profit and Loss Account for the year ended March , Provision for doubtful debts: Further bad debts New provision , , Less Old provision , , * Only relevant items. Balance Sheet as at March , Sundry debtors , Less Further ( , ) bad debts , Less Provision ( , ) for doubtful debts , * Only relevant items.

Note : The amount of new provision for doubtful debts has been calculated as follows: Rs. , × / = Rs. , . A business enterprise allows discount to its debtors to encourage prompt payments.

Discount likely to be allowed to customers in an accounting year can be estimated and provided for by creating a provision for discount on debtors. Provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts. The following journal