From the following details find out the amount to be debited to Profit and Loss A/c as fresh provision for doubtful debts during 2012-13 Debtors ` 30,000 as on 31.03.2013. Bad debt during the year ` 1,500. Provision for bad debts as on 01.04.2012 ` 2,000. Provision for doubtful debts to be kept at 5% of total debtors
A)1,500 .
B)1,000 .
C)3,000 .
D)2,000

Question

Quizplus · Accepted Answer

The amount to be debited to the Profit and Loss Account as fresh provision for doubtful debts is calculated as follows: Total Debtors = `30,000. Desired Provision for Doubtful Debts = 5% of `30,000 = `1,500. Since there was already a provision of `2,000 at the beginning of the year, and the desired provision is `1,500, the adjustment would actually involve crediting the provision account by `500 (`2,000 - `1,500) to reduce it to the desired level. However, since the question asks for the amount to be debited (which implies the additional amount required to reach the desired provision level), and considering the provision is already over the required amount, there's no need for an additional debit for the provision for doubtful debts. The confusion might arise from the interpretation of the question; however, if we strictly calculate the fresh provision needed based on the given data, it's `1,500 (5% of `30,000) - but since we're adjusting downwards, the direct answer to the amount to be debited as fresh provision is not straightforward from the provided options without considering the reduction. The correct approach involves recognizing the need to adjust the provision to the desired level, but the direct debit action for fresh provision is not needed as per the given options and scenario. This seems to be a misunderstanding in the explanation based on the provided options and the question's phrasing. The correct action is to calculate the new provision required and adjust accordingly, which would be to create a provision of `1,500, but the net action considering the existing provision would not match the provided options directly for a fresh provision debit action.

From the Following Details Find Out the Amount to Be