3. 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 1st
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.
4. 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
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Question
Trial Balance of -----
Particulars Dr Cr
Debtor 205000
Additional information:
(i) A debtor for Rs 5000 has become insolvent & nothing can be discovered.
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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
8. 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.
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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.
10. 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.
