Adjustments: (1) Write off S6000 as Bad debts from Debtors. (2) Provision for doubtful debts at 5% is to be made on debtors (3) Provision for discount reserve on Debtors at 1% is to be made.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
![The following balances are taken from the trial balance of Mike as on 31-03-2015.
Debtors
Bad Debt reserve
Discount Allowed
2,00.000
Bad Debts
Discount Reserve on Debtors
10.000
400
5000
600
Adjustments:
(1) Write off $6000 as Bad debts from Debtors.
(2) Provision for doubtful debts at 5% is to be made on debtors
(3) Provision for discount reserve on Debtors at 1% is to be made.
Prepare profit and loss A/C and Balance Sheet of Mike for the year ending on 31-03-2015](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5a35b1e9-d59c-4501-a919-dd1ec65606fc%2Faf3d5066-b077-47cf-9e54-9a25a4048a57%2Fqml59v_processed.jpeg&w=3840&q=75)
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