Amity Business School Amity Business School 7. Interest on capital Particulars Amt Particulars Amt Profit & Loss Account To interest On capital xxx Liabilities Amt Assets Amt Balance sheet as on --- Capital + Interest xxx Question: On 1 st April 2009 the capital invested Rs 100000. Interest on capital to be allowed @10%p.a. Show the Trading P/L account & Balance sheet treatment of the above item for the Financial Year . 8. Interest on Drawings Profit & Loss Account Balance sheet as on --- Particulars Amt Particulars Amt Liabilities Amt Assets Amt By interest On Drawings xxx Capital xxx -Drawings xx -Interest xx xxx Question: On 1.4.2009 the capital invested was Rs. 200000. During the year total drawings amounted Rs 20,000. Interest on Drawings to be charged at 10% p.a. Amity Business School 9(a). Bad Debts Bad Debts refers to a debts which become irrecoverable. In simple words, it represents the amount due from The customer ,which could not be recovered Treatment of BAD DEBTS ( when Bad Debts is given outside the Trial Balance) 1. Show in the debit side of Profit & Loss Account 2. Shown on the ASSET side of the Balance Sheet by way of deducting from Debtors Profit & Loss Account of --- Particulars Amount Particulars Amount To Bad Debts xxx Balance Sheet as on --- Liabilities Amount Assets Amount Debtors xxx Less Bad Debts xx xxx
Amity Business School Question Trial Balance of ----- Particulars Dr Cr Debtor 205000 Additional information: (i) A debtor for Rs 5000 has become insolvent & nothing can be discovered. Amity Business School 9(b). If Bad Debts appear inside the Trial Balance & further bad debts are given outside the Trial Balance Profit & Loss Account of --- Particulars Amount Particulars Amount To Bad Debts xxx Add Further BD xxx xxx
Liabilities Amount Assets Amount Debtors xxx Less Further bad debts xxx xxx Amity Business School Question Particular Dr Cr Trial Balance of ----- Debtor 200000 Bad Debts 10000 Additional information (i) Additional Bad Debts Rs 5000 . Amity Business School 9(c) Provision for Bad & Doubtful Debts Sometime the businessmen finds that certain debts are doubtful i.e. the payment to be received May or may not be received. Howe ever it cannot be written off as bad debts because non recovery Of such amount is not certain. So those anticipated losses must be provided as per the accounting Principle. In order to show the Debtor at its true value in the Books & to provide for future losses, Provision for Doubtful Debt is created Trial Balance as on ------ Particulars Dr Cr Debtors 205000 Bad Debts 3000 Additional information: (i) A further bad debts of Rs 5000 has come into notice after the Trial balance is being prepared (ii) Create 10% provision for Doubtful debts on Debtors. Amity Business School 9(d). If Provision for Bad Debts already appears in the Trial Balance. And it is also given in the additional Information to create a new Provision for Bad & Doubtful Debts Particulars Dr Cr Debtors 205000 Bad Debts 3000 Provisions for doubtful debt 10000 Additional information: (i) Additional Bad debts Rs 5000 (ii) Maintain the provision for Doubtful debts @10% on debtors.