Use the information below to answer questions 16 and 17.Sundry debtor..................₦20,000 Provision for bad debts........₦500Provision for bad debt at ...

Use the information below to answer questions 16 and 17.Sundry debtor..................₦20,000

Provision for bad debts........₦500Provision for bad debt at 4% of sundry debtors.Determine the provision for bad debts to profit and loss account?

Answer Details

The provision for bad debts is an estimate of the amount of bad debts that may arise from the credit sales made to customers. In this case, the sundry debtors are ₦20,000, and the provision for bad debts is calculated at 4% of this amount, which is ₦800. However, the provision for bad debts account already has a balance of ₦500. To determine the provision for bad debts to be charged to profit and loss account, we need to calculate the increase in the provision for bad debts from the previous year. The increase in the provision for bad debts is the difference between the current provision for bad debts and the previous year's provision for bad debts. The previous year's provision for bad debts is ₦500, and the current provision for bad debts is ₦800. Therefore, the increase in the provision for bad debts is ₦300, which is the amount that should be charged to profit and loss account. So, the answer is ₦300.