Question

In a new business during the year ended 31 December 2019 the following debts are found to be bad and are written-off on the dates shown below:

31 Jan              S. Seal & Son              $800

31 July             H. Halt Ltd                 $500

31 Oct            A.Alice                        $300

On 31 December 2019 the schedule of remaining accounts receivable totaling $20,000 is examined and it is decided to make an allowance for doubtful debts of $700.

Required:

1. Bad Debts Account for the year ended 31 December 2019.             

2. Allowance for Doubtful Debts Account for the year ended 31 December 2019.

3. Extract from the Statement of Profit or Loss for the year ended 31 December 2019.

4. Extract from the Statement of Financial Position as at 31 December 2019.

Answer 1

a.	Bad Debt Accounts
To S. Seal & SonsA/c	800
To H. Halt Ltd. A/c	500
To A. Alice A/c	300
			By P and L A/c	1600
		1600			1600
a.	Doubtful Debts Account
To provision for Doubtful debts A/c	700
			By Balance C/d	700
		700			700
a.	Extracts of Statement of Profit and Loss A/c
To Bad Debts A/c	1600
To Doubt ful Debts	700
a.	Extracts of Statement of Financial Position as at 31 December 2019
Provision for Doubt Ful Debts	700	Account receivable 21600	19300
			Less: Bad Debts 1600
			Less: Doubtful Debts 700

Working Notes:

Name of the Debtor	Amount if Bad Debt
S. Seal & Son	800
H. Halt Ltd.	500
A. Alice	300
	1600
	21600
Account Receivable Remianing	20000	( After Deducting Bad Debt)
	700