In a partnership firm on the revaluation of assets, there are debtors of ₹45000 and a provision of doubtful debts of ₹5000 already exists. Debtors of ₹2000 will be written off completely and a provision of 5% on debtors for bad and doubtful debts will be maintained. Pass the journal entry according to revaluation A/c.
Answer & explanation
Correct answer: option 3
Bad debts = 2000
Provision exists= 5000
So, the remaining provision is 5000-2000= 3000
Provision should be made= (45000-2000)*5/100=2150
Reaming provision is more than the provision should be maintained so the balance will be credited in revaluation A/c because it is a gain for the firm(3000-2150)= 850
So, entry will be-
Provision for doubtful debts Dr... ₹850
To Revaluation A/c ₹850