Financial Statements - II

The existence of bad debts in the trial balance signifies that Ankit has incurred a loss arising out of bad debts during the year and which has been already recorded in the books of account. However, assuming one of his debtors who owed him Rs. , had become insolvent, and nothing is receivable from him. But the amount of bad debts related to the current year is still to be account for.

This fact appears as additional information and is termed as further bad debts. The adjustment entry to be recorded for the amount will be as follows. For this purpose, Ankit needs to record an adjustment entry as under : This entry will reduce the value of debtors to Rs. , ( Rs.

, – Rs. , ) and increases the amount of bad debts to Rs. , (Rs. , + Rs.

, ). The treatment of further bad debts in profit and loss account and balance