Accounting?
I've been given a trial balance, and the things on it that I don't understand are: On it it says:
DR CR
Provision for Bad Debts: 450
Bad Debts 1100
OTHER NOTES AT THE END OF THE PERIOD:
a) The provision for Bad Debts is to be maintained at 5% of debtors
What do I do with this, for example what would be the figure that I put in the trading/p&l account, and what would I put in the balance sheet!
Thanks!
Answer:
I would say the balance between the two amounts must be put in General jounal. Dr Bad Debt Cr Provision of $650 and Balance sheet is 1100
DR = Debit
CR = Credit
Provision for Bad Debts is a contra asset account meant to estimate the amount of accounts receivable that will not be collectible. A contra asset is an asset with a credit balance as opposed to a debit balance. If the provision is 5% of A/R and that equals $450, then your A/R should be $9000. The $1,100 Bad Debt is the expense account. This is the amount of A/R that have actually been written off over the course of the year.
Now, the rest of your question looks Greek to me.
DR is the abbreviation for debit
CR is the abbreviation for credit
Provisions for Bad Debt is a balance sheet account
Bad Debt (probably refers to bad debt expense - a P&L Account)
The next two colums on your worksheet are Adjustments debit and credit
Multiply the A/R account on the trial balance by.05 put this figure in the Provision for bad debts 450 account under the adjustment column labeled credit and the same amount in the Bad debts account 1100 under the adjustment column debit. the adjusting entry goes in the general journal as
Bad debts - Debit XXX
Provision for bad debts - Credit XXX
The XXX amount is your Accounts Receivable in the trial balance columns multiplied by .05
Hope this helps
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