Adjusting the provision of general bad debt

Moderator: Bluewednesday

Adjusting the provision of general bad debt

Postby Leeu » Thu Oct 20, 2011 6:25 am

Hi all,

Well I have searched high and low through books and the internet but I cannot find my answer, so I thought who better to ask than those brilliant minds of the accountancy students forum.

Here's my problem:

I need to adjust the provision for general bad debt to 3% of the remaining total debtors.
The total debtors are £94,500 and the general bad debt provision is currently £2,000.

My attempt at working it out was to do £94,500 x 3% = £2,835 but I have my doubts that this is right. If it is please confirm and i am happy, if it's not PLEASE would somebody put me out of my misery and show me how to work it out.

Thanks
Leeu
 
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Re: Adjusting the provision of general bad debt

Postby Bluewednesday » Fri Oct 21, 2011 1:34 am

The new provision needs to be (94500 * 3%)2835. There already is £2000 in the provision account so you need to add another 835.

The double entry is Dr bad debts and cr provision for bad debts 835.

Does that help?
bluewednesday
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Re: Adjusting the provision of general bad debt

Postby Leeu » Fri Oct 21, 2011 2:13 am

Yes that does help, so I was on the right track after all.
Thank you, your answer has really helped.
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