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
Correct Answer: D
Explanation
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
