Question 2 Balance Day Adjustments

Question

Using the following information, prepare journal entry for provision for doubtful debts for the year ending 31 December 2019.
Trade debtors 31.12.2019 K 52 000
Provision for doubtful debts 1.1.2019 2 300
Provision for the year 5%

Answer 1

Provision for doubtful debts for the year ending 31 December 2019:

Provision for doubtful debts (Income Statement) 2,600
Provision for doubtful debts (Balance Sheet) 2,600

Calculation:
Provision for the year = Trade debtors 31.12.2019 * 5%
Provision for the year = K52,000 * 5% = K2,600

This entry increases the provision for doubtful debts on the balance sheet to K2,600 to account for potential bad debts on the trade debtors.