URGENT! ACCOUNTING PAPER 1 FOR JUNE 2005 Q 4

[arvind0708]

4 A business makes a provision for doubtful debts equal to 5 % of its debtors.
At 31 March 2003 net debtors were shown in the Balance Sheet as $17 100.
At 31 March 2004 the balance on its Sales Ledger Control account was $19 000. In the year
ended 31 March 2004 a bad debt of $800 had been written off.
How much should be debited in the Profit and Loss Account for the year ended 31 March 2004
for the provision for doubtful debts?
A $10 B $50 C $55 D $95

HOW TO GET THE ANSWER.

 

[Roadster 125]

Assalam o Allikum..!!
Net debtors for 2003 wre 17100 this means 5% provision for doubtful that was already Subtracted from them so to find out how much provision was made in 2003 we have to add back the amount .. i.e 17100 *100 / 95 = 18000
18000 were debtor before provsion so provsion was made 5% = 18000 * 5% = 900
Provsion for 2004 was 19000*5% = 950
So , Increase in provision is = 950 - 900 = 50
50 is them amount to be debited in the profit and loss account .. Option B is the Correct Answer THANK YOU.. =)