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Provision For DD

The document contains 6 questions related to accounting for provisions for doubtful debts. Each question provides additional details about trade receivables balances, provision percentages, and asks the student to prepare various journal entries and accounts related to establishing and adjusting provisions for doubtful debts based on the information provided.

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Cooking Classes with Zainab 12
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90 views3 pages

Provision For DD

The document contains 6 questions related to accounting for provisions for doubtful debts. Each question provides additional details about trade receivables balances, provision percentages, and asks the student to prepare various journal entries and accounts related to establishing and adjusting provisions for doubtful debts based on the information provided.

Uploaded by

Cooking Classes with Zainab 12
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question 1:

On 1 January 1999 a business had a provision for doubtful debts account with a credit balance
of $ 1500.
The business maintained the provision at 5% of the trade receivables outstanding at the end of
each year. At 31 December each year the trade receivables were as follows:
1999 $ 24,000
2000 $ 32,000

For the two years 1999 and 2000, show the necessary entries in the provision for doubtful
debts account and the profit and loss account, and show how the final figure for trade
receivables would appear in the statement of financial position as at 31 December 2000.

Question 2:
A firm’s statement of financial position, prepared on 31 December each year, has always shown
a provision for doubtful debts of 5% of trade receivables. The same rate of provision is to be
used in 1991 and 1992.

Prepare the provision for doubtful debts account for the years 1991 and 1992, paying particular
attention to the dates and wordings from the following particulars:
Trade receivables on 31 December Amount
1990 $ 6,120
1991 $ 6,780
1992 $ 6,360

Question 3:
A firm’s accountant decided in 1993 to keep a provision for doubtful debts account. The
provision was to be maintained at 5% of trade receivables outstanding at the year end. Trade
receivables balances at the end of each year were:
31 December 1993 $ 8,200
31 December 1994 $ 9,160
31 December 1995 $ 8,120

Prepare the provision for doubtful debts account for the years 1993, 1994 and 1995.
Question 4:
On June 1988, when A. Knights trade receivables totaled $ 1,600, he created a provision for
doubtful debts of 5% of his trade receivables.

On 30 June 1989, his trade receivables amounted to $ 1,200 and he adjusted his provision when
he prepared the final accounts for the year, so that the provision was maintained at 5% of his
trade receivables.

Show the entries in the provision for doubtful debt account for the year to 30 June 1989 and
balance off the account.

Question 5:
Jill Cowdrey started a business on 1 January 1996. At the end of 1996 there were debtors of $
8,000. A provision for doubtful debts of 5% of the trade receivables total was made.

Trade increased in 1997, because of discounts given for prompt payments. At 31 December
1997, the trade receivables stood at $ 10,200. This figure included irrecoverable debts of $ 200
which Cowdrey decided to write off against the 1997 profit. She also decided to keep provision
for doubtful debts at 5% of the trade receivables balances carried forward to 1998.

a. Prepare the provision for doubtful debts accounts for 1996 and 1997.
b. Show the entries which appear in the 1997 profit and loss account based on the above
information. Make clear whether they are debit or credit entries.
c. Draw up a statement of financial position extract showing the value of the trade
receivables at 31 December 1997.

Question 6:
On 30 September 2011, after preparing the sales ledger control account Andrea was advised
that Keira is unable to pay the whole of her debt, $2 500.

Andrea accepted $500 in full settlement and the balance of the debt was written off.

REQUIRED
Prepare journal entry to record the transactions on 30 September 2011. Narrative not required.

Andrea carried out a review of her remaining trade receivables before preparing her financial
statements. The following information relating to her trade receivables was available:
Andrea has the following policy for calculating the provision for doubtful debts:

a. Calculate the value of the provision for doubtful debts at 30 September 2011.
b. On 1 October 2010 the balance of the provision for doubtful debts account was $1 500.
Prepare the provision for doubtful debts account for the year ended 30 September 2011.
Bring down the balance on 1 October 2011.
c. Name two accounting principles which Andrea is applying by maintaining a provision for
doubtful debts.

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