Following is the extract of Balance Sheet:
| Liabilities | ₹ | Assets | ₹ |
|
Debtors 6,000 Provision for Doubtful Debts 400 |
5,600 |
Additional Information:
Provision for doubtful debt was to be made 5% on debtors.
The following entry to record the above adjustment is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) -
Provision for Doubtful Debts A/c Dr. 100
To Revaluation A/c 100
Provision is to be made 5% which will be = 6,000 x 5/100
= 300
Existing provision = 400
Gain = 400- 100
= 100
Gain will be credited to revaluation account.
So, journal entry will be-
Provision for Doubtful Debts A/c Dr. 100
To Revaluation A/c 100