Use the information below to answer questions

Sundry debtor..................N20,000

Provision for bad debts........N500

Provision for bad debt at 4% of sundry debtors.

Determine the provision for bad debts to profit and loss account?

  • A N500
  • B N820
  • C N1300
  • D N300
jamb 2010accounting

The correct answer is D. N300

The business owner made a provision of 500 as bad debt. Total debt owed was 20,000. At the end of the period, bad debts was 4%. Hence we have; 

4% x 20000

0.04 x 20000 = 800

we subtract the total bad debt from the amount that was initially provided for bad debt and charge it to the profit and loss account as a expense

Provision for bad debts = 500

800 - 500 = 300

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