Read the following passage and answer the following question.
A, B & C are partners sharing profits and losses in the ratio of 2:2:1. B decided to retire on 31st March 2021. On the date of retirement, some of the assets and liabilities appeared in the books as follows-
Creditors- ₹70,000
Building- ₹1,00,000
Machinery- ₹40,000
Stock of raw material- ₹20,000
Stock of finished goods- ₹30,000
Debtors- ₹20,000
How much provision was created if it is agreed that a 5% provision is made for doubtful debts?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹1,000.
Debtors = ₹20,000
Provision = 5%
Provision of doubtful debts = 20,000*5/100
= ₹1,000