What is meant by provision for doubtful debts? How are the relevant accounts prepared and what journal entries are recorded in final accounts? How is the amount for provision for doubtful debts calculated?
Provision for doubtful debts is a kind of arrangement about the expected bad debts from the debtors. Generally it is provided after deducting the amount of bad debts from the debtors. In other words provision is made only on good debtors those who have already proven bad, there is no need to make any provision on that. As provision for doubtful debts is made after preparing the trial balance, to record it we need a kind of adjustment entry in this regard we prepare debtors account and provision for doubtful debts account. For recording bad debts, the following journal entry is passed:
Profit and Loss A/c Dr.
To Provision for Doubtful Debts A/c
(Being provision for doubtful debts is created out of current year profits)
Computation of the Amount of Provision for Doubtful Debts As it is given at the end of a trial balance as an adjustment, little other related adjustment may be there for instance bad debts and discount on debtors. In this case provision for doubtful debt will be created after deducting the figure for bad debts out of the debtor figure.
If the rent of one month is still to be paid the adjustment entry will be :
(a) Debit outstanding rent account and Credit rent account.
(b) Debit profit and loss account and Credit rent account.
(c) Debit rent account and Credit profit and loss account.
(d) Debit rent account and Credit outstanding rent account.
What adjusting entries would you record for the following :
(a) Depreciation
(b) Discount on debtors
(c) Interest on capital
(d) Manager’s commission
State the meaning of:
(a) Outstanding expenses
(b) Prepaid expenses
(c) Income received in advance
(d) Accrued income
Rahul’s trial balance provide you the following information :
Debtors Rs. 80,000
Bad debts Rs. 2,000
Provision for doubtful debts Rs. 4,000
It is desired to maintain a provision for bad debts of Rs. 1,000
State the amount to be debited/credited in profit and loss account :
(a) Rs. 5,000 (Debit) (b) Rs. 3,000 (Debit)
(c) Rs. 1,000 (Credit) (d) none of these.
If the opening capital is Rs. 50,000 as on April 01, 2016 and additional capital introduced Rs. 10,000 on January 01, 2017. Interest charge on capital 10% p.a. The amount of interest on capital shown in profit and loss account as on March 31, 2017 will be :
(a) Rs. 5,250 (b) Rs. 6,000
(c) Rs. 4,000 (d) Rs. 3,000
What is meant by closing stock? Show its treatment in final accounts?
If the rent received in advance Rs. 2,000. The adjustment entry will be :
(a) Debit profit and loss account and Credit rent account.
(b) Debit rent account Credit rent received in advance account.
(c) Debit rent received in advance account and Credit rent account.
(d) None of these.
What are adjusting entries? Why are they necessary for preparing final accounts?
If the insurance premium paid Rs. 1,000 and prepaid insurance Rs. 300. The amount of insurance premium shown in profit and loss account will be :
(a) Rs. 1,300 (b) Rs. 1,000
(c) Rs. 300 (d) Rs. 700
Give the journal entries for the following adjustments :
(a) Outstanding salary ₹ 3,500.
(b) Rent unpaid for one month at ₹ 6,000 per annum.
(c) Insurance prepaid for a quarter at ₹ 16,000 per annum.
(d) Purchase of furniture costing ₹ 7,000 entered in the purchases book.
Name any two types of commonly used negotiable instruments.
State the meaning of incomplete records?
What is ‘Depreciation’?
Briefly state how the cash book is both journal and a ledger.
State the meaning of a trial balance?
State the four basic requirements of a database applications.
Define accounting.
State the different elements of a computer system.
Why is it necessary for accountants to assume that business entity will remain a going concern?
State the need for the preparation of bank reconciliation statement?
Describe the advantages of sub-dividing the Journal.
‘Computerised Accounting Systems are best form of accounting system’. Do you agree? Comment.
Passbook is a copy of:
(a) Copy of customer Account (b) Bank column of cash book
(c) Cash column of cash book (d) Copy of receipts and payments
Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order.
Explain the concept of cost of goods sold?
Define accounting.
Explain the development and role of accounting.
List the various advantages of computerised accounting systems.
What is meant by Grouping and Marshalling of assets and liabilities. Explain the ways in which a balance sheet may be marshalled.
Does debit always mean increase and credit always mean decrease?