Provision for doubtful debt was ₹3,000 and Debtor are of ₹50,000. At the time of Revaluation, it was considered that provision on debtor is to be created at 10%.
What will be the impact on revaluation account in view of the above?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Revaluation account will be debited by ₹2,000.
Debtors = 50,000
Provision to be made 10% i.e. = 50,000 x 10/100
= 5,000
Old provision = 3,000
Extra provision to be made = 5,000 - 3,000
= 2,000
This 2,000 is loss for the firm so it is debited to revaluation account. Journal entry made for this-
Revaluation A/c Dr. ₹2,000
To Provision for doubtful debts ₹2,000