TUTORIAL 3Chapter 3: Bad Debts, Provision for Doubtful Debts

and Provision for Cash DiscountsPresented by

QUESTION 2

Prepare for each of the two years, the following ledger account:

• Provision for doubtful debts

For the Financial year ended 31 March 2011• Specific provision = RM 1500• General provision = 1% x (RM 150000 - RM 1500) = 1% x RM 148500 = RM 1485• Provision for doubtful debts = RM 1500 + RM 1485 = RM 2985

For the Financial year ended 31 March 2012• Specific provision = RM 1000• General provision = 1% x (RM 130000 – RM 1000) = 1% x RM 12900 = RM 1290• Provision for doubtful debts = RM 1000 + RM 1290 = RM 2290

Provision for Doubtful DebtsDate Details Amount

(RM)Date Details Amount

(RM)

2011Mar 31 Bal c/d 2985

2010April 1 Bal b/d 2150

2011Mar 31 SOCI 835

2985 2985

2012Mar 31 SOCI 695

2011April 1 Bal b/d 2985

Bal c/d 2290

2985 2985

2012April 1 Bal b/d 2290

Show the Provision of Doubtful Debts account, Bad Debts account, Extracts of Statement of Comprehensive Income, Extracts of Statement of Financial Position for the year 2011 and 2012.

QUESTION 3

For the Financial year ended 31 December 2011• Bad debt = RM1500• Specific provision = RM3000• General provision = ( RM13800 – RM1500 – RM3000 ) X 10% = RM9300 x 10% = RM930• Provision of doubtful debts = RM3000 + RM930 = RM3930

For the Financial year ended 31 December 2012• Bad debt = RM1600• General provision = ( RM19500 – RM1600 ) X 10% = RM17900 x 10% = RM1790• Provision of doubtful debts = RM1790

Provision of Doubtful DebtDate Details Amount (RM) Date Details Amount (RM)

2011Dec 31 Bal c/d 3930

2011Dec 31 SOCI 3930

2012Dec 31 SOCI 2140

2012Jan 1 Bal b/d 3930

Bal c/d 1790

3930 39302013Jan 1 Bal b/d 1790

Bad Debt

Date Details Amount (RM) Date Details Amount (RM)

2011Dec 31 Ah Lek 1500

2011Dec 31 SOCI 1500

2012Dec 31 Alan 1600

2012Dec 31 SOCI 1600

Extract of Statement of Comprehensive Income for the year ended 31 December

2011 2012

Other Income :

Decrease in provision of doubtful debts

2140

Less : Expenses

Increase in provision of doubtful debts 3930

Bad debts 1500 1600

Extract of Statement of Financial Position for the year ended 31 December

2011 2012

Account Receivable 12300 17900

Less : Provision of doubtful debt (3930) (1790)

8370 16110

QUESTION 4

(a) Prepare the journal entries in the books of the company necessitated by the receipt from Toni.

Date Description Ref. Debit (RM) Credit (RM)

2012Nov 30 Cash 300

Accounts Receivable - Toni 300

(Received cash from Toni)

Accounts Receivable – Toni 300

Bad debt recovered 300

(Reinstate Toni as part of the accounts receivable)

General Journal

(b) Prepare the provision for doubtful debts account in the books of the company for the year ended 30 Nov 2012.

Bad debts = RM1800 + RM300 = RM2100Provision for doubtful debts = 2% x (RM25000 - RM2100)

= 2% x RM22900 = RM458

Provision of Doubtful Debt

Date Details Amount (RM) Date Details Amount (RM)

2012Nov 30 Bal c/d 458

2011Dec 1 Bal b/d 400

2012Nov 30 SOCI 58

458 458

2012Dec 1 Bal b/d 458

(c) Show the entry for accounts receivable which will be included in the Statement of Financial Position as at 30 November 2012 of the company.

Accounts ReceivableDate Details Amount

(RM)Date Details Amount

(RM)

2011Dec 1 Bal b/d 25000 2012

Nov 30 Cash 300

2012Nov 30 Bad debts

recovered 300 Bad debt-Mary 1800

Bad debt-Ahmad 300

Bal c/d 22900

25300 25300

2012Dec 1 Bal b/d 22900

Extract of Statement of Financial Position as at 30 November 2012

2012

Account Receivable 22900

Less : Provision of doubtful debt (458)

22442

QUESTION 5Prepare in Jeremy’s ledgers the following

accounts for the year ended 31 March 2012:• Provision for doubtful debts account• Bad debts account

Specific provision = RM 2500General provision = RM 5500Provision for doubtful debts = RM 2500 + RM 5500 = RM 8000

For the Financial year ended 31 March 2011

For the Financial year ended 31 March 2012

Bad debts = (RM 1200 x 0.60) + (RM 2500 x 0.55) + RM 300 = RM 720 + RM 1375 + RM 300 = RM 2395Provision for doubtful debts = 3% x (RM 205000) = RM 6150

Provision for Doubtful Debt

Date Details Amount (RM) Date Details Amount (RM)

2012March 31 SOCI 1850.00

2011April 1 Bal b/d 8000.00

Bal c/d 6150.00

8000.00 8000.00

2012April 1 Bal b/d 6150.00

Bad DebtsDate Details Amount (RM) Date Details Amount (RM)

2011May 31 Shi Hua 720.00

2012Mar 31 SOCI 2395.00

June 30 Umi Kalsom 1375.00

Feb 28 Debtors 300.00

2395.00 2395.00