Question
A company’s financial details as of 31.03.2023 are
as follows: • Additional bad debts during the year = ₹ 15,000 •The company follows a policy of keeping a provision of 8% on outstanding trade receivables. What will be the total impact on the Profit and Loss Account?Solution
Calculation: 1. Total Bad Debts: oExisting bad debts = ₹ 5,000 oAdditional bad debts = ₹ 15,000 oTotal bad debts = ₹ 20,000 2. Provision Calculation: oNet trade receivables after bad debts = ₹ 2,80,000 - ₹ 20,000 = ₹ 2,60,000 oNew provision (8% of ₹ 2,60,000) = ₹ 20,800 oOld provision = ₹ 12,000 oIncrease in provision = ₹ 20,800 - ₹ 12,000 = ₹ 8,800 3. Total impact on P&L: oTotal bad debts (₹ 20,000) + Increase in provision (₹ 8,800) = ₹ 28,800
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