Following is the trial balance of a firm as on 31.03.2022: Trade receivables Rs. 2,50,000 Provision for discount to debtors Rs. 14,000 Discount to debtors Rs. 4,000 Additional discount allowed to debtors during the years is Rs. 20,000. The firm has a policy of maintaining a provision for discount to debtors equal to 10% of the Trade Receivables’ balances. Total amount to be charged to Profit and Loss Account (for the year ending 31.03.2022) For discount allowed and provision for discount created will be:
- ARs. 25,000
- BRs. 13,000
- CRs. 9,000
- DRs. 33,000
Explanation
The additional discount of Rs. 20,000 allowed during the year reduces trade receivables to Rs. 2,50,000 - Rs. 20,000 = Rs. 2,30,000. The required provision for discount at 10% is therefore Rs. 23,000; against the existing provision of Rs. 14,000, a further Rs. 9,000 must be provided. Total discount allowed for the year is Rs. 4,000 (trial balance) + Rs. 20,000 = Rs. 24,000. The total charge to the Profit and Loss Account is Rs. 24,000 + Rs. 9,000 = Rs. 33,000, option (d).