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Rs. 100 000 should be written off from debtors and allowance for doubtful debt on 2021.12.31 shouldbe adjusted as 10% of closing trade receivable

Question

Rs. 100,000 should be written off from debtors and allowance for doubtful debt on 2021.12.31 should be adjusted as 10% of closing trade receivable

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Solution

Sure, here are the steps to write off Rs. 100,000 from debtors and adjust the allowance for doubtful debt:

  1. Write off Rs. 100,000 from Debtors: This means that you are removing Rs. 100,000 from the total amount of money owed to you by your debtors. You will debit the allowance for doubtful debts account and credit the debtors account with Rs. 100,000. This reduces the total amount of your debtors.

  2. Adjust Allowance for Doubtful Debt: After writing off Rs. 100,000, you need to adjust the allowance for doubtful debts to be 10% of the closing trade receivable. First, calculate the closing trade receivable. Then, calculate 10% of this amount. This is the new figure for your allowance for doubtful debts.

  3. Record the Adjustment: Debit the allowance for doubtful debts account and credit the profit and loss account with the difference between the old and new allowance for doubtful debts. This adjusts the allowance for doubtful debts to the correct amount.

  4. Review Financial Statements: Finally, review your balance sheet and income statement to ensure the write-off and adjustment have been accurately recorded. The total of your debtors should be Rs. 100,000 less than before, and your allowance for doubtful debts should be 10% of the closing trade receivable.

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