Which of the following formula is correct to calculate provision on debtors to be transferred to Profit and Loss Account?

Question

Question

This question was previously asked in

UP TGT Commerce 2021 Official Paper

Answer 1

The Correct Answer is Bad Debts + New Bad Debts + New Provision - Old Provision

Key Points

Provision for Bad Debts:

The provision for Bad Debts refers to the total amount of Doubtful Debts that need to be written off for the next accounting period.
Doubtful Debt represents an expense that reduces the total accounts receivable of a company for a specific period.

Important Points

Provision for debtors

Particulars	Amount	Particulars	Amount
To Bad debts	xxxxx	By Balance b/d (Opening Balance)	xxxxx

To Balance c/d (Closing Balance)	xxxxx	By Profit and loss A/c (Balancing figure)	xxxxx

By above provision for debtors account it is clear that the amount to be transferred to profit and loss account is calculated by adding closing balance and bad debts and deducting opening balance of provision for debtors a/c.
The profit and loss account is debited by the resultant of the following:
Bad Debts + New Bad Debts + New Provision - Old Provision