Question { 2123 }

the following information wads extracted ffrom the book of a business man :debtors as on 31/12/1987 $25000 bad debts during 1987 $1000.provision for doubtful debts is to be maintained at 5%. a provision for discount is also at 2%. you are required to calculate the amount set aside in respect of provision for doubtful debts and provision for discounts on debtors respectively

Answer

Debtors for the year 1987 is - 25000
Bad debts - 1000
Doubtful debts - 5% ie; 25000 -(25000*5/100 =1250)= 23750
Pro. for Discount on Debtors 2% - (22750*2/100) = 22295
therefore

In balance sheet (Assest Side)
Debtors - 25000
Less: bad-debts - 1000

= 24000
less: pro.for doubtful debts 1250
= 22750
Less: Pro. for Discount on debts - 455
22295

In P & L Account(debit Side)
Bad debts - 1000
Add: Pro for Bad debts - 1250
Add: Pro for Discount on Debts- 455
= 2705

Question { 1896 }

The Trial balance will show only the Opening Stock & Purchase for any given period, but for Profit and loss, we have to calucate the Opening + Purchase – Closing stock ?

Answer

however when u manually make a P & L from Trail balance, the closing stock will be simple, Add all the Revenue less the expenses & Deprication, and there will be a figure in Trial balance for Retained earning this difference should match with your closing stock Physical inventory valuatation (is this statement correct?)