Provision of doubtful debts and bad debts

New Zealand Discussion in 'Exams and Studying' started by rach572, Sep 18, 2016.

  1. rach572

    rach572

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    Hi there,

    For an assignment I have to write a profit and loss statement and a statement of financial position. I am given a trail balance that I have to adjust. One of the things I have to adjust is the provision of doubtful debt account and the bad expense account. They both currently sit at $2,500 and I am told that the provision of doubtful debts account should be 7% of the accounts receivable balance which is $14,800 so I have calculated that at $1,036. I am just a bit confused as to how I make this adjustment to the existing figure on the trail balance? Like do I just add $1,036 to $2,500? Will the bad debt expense also be affected? Also I have been told that a bad debt of $1,800 needs to be written off so I have written up a journal entry for that but will this affect the accounts receivable closing balance at all? I have read a lot of different info on this bit still can't figure it out. Any help would be amazing!!
     
    rach572, Sep 18, 2016
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  2. rach572

    Triest123 VIP Member

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    The additional bad debt provided for the year is 1,036 - ($2,500-1,800) = 336
     
    Triest123, Sep 18, 2016
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