Following is an extract of Balance Sheet of a firm om 31st March 2022, with additional information.
As on 31st March,2022
| Liabilities | ₹ | Assets | ₹ |
|
Debtors 43,000 (-) Provision for doubtful debts 1,000 |
42,000 |
Additional Information :
Debtors realised 95% of book value .
Record journal entry for realisation of debtors.
Answer & explanation
Correct answer: option 2
The correct answer is option (2)-
Bank A/c Dr 40,850
To Realisation A/c 40,850
Debtors = ₹43,000
Realised value = 95%
Realised amount = 43,000 x 95/100
= 40,850
Bank account is debited as bank balance of the firm increased by the realised amount and realisation account is credited as Debtors were already transferred to Realisation account. So, the journal entry should be :
Bank A/c Dr 40,850
To Realisation A/c 40,850
NOTE- Provision for doubtful debts are not included while calculating the realised amount as Provision is just an estimate not actual bad debts. When actual realised value is given then there is no use of provision.