Practicing Success
Book debts was ₹1,00,000 as given in the balance sheet as on 31st March 2022. On 1st April, 2022 the partners decided to share profits equally instead of distributing the profits in there capital ratio. On the date, bad debts for Rs40,000 were written off and a new provision for doubtful debt is to be maintained @5%. How will you treat their adjustment in revaluation account of the firm? |
Revaluation account - debited by ₹45,000 Revaluation account credited by ₹45,000 Revaluation account - debited by ₹43,000 Revaluation account credited by -43,000 |
Revaluation account - debited by ₹43,000 |
The correct answer is option (3) : revaluation account - debited by ₹43,000. Book debts = ₹1,00,000 Remaining book debts after bad debts = 1,00,000 - 40,000 Provision to be made = 5%. Both bad debts and provision is loss for the firm so revaluation account is debited. Journal entry for this- |