• 1 Marks

FA – May 2013 – L1 – SA – Q22 – Accounting Treatment for Bad and Doubtful Debts

This question involves calculating the net trade receivables after applying provision for doubtful debts and discount.

The trial balance of a business shows a trade receivables balance of N90,000. Provision for doubtful debts is 5% of total receivables, while provision for discount on receivables is 2%. The amount to show in the Financial Statements as net trade receivables would be:

N83,790

Explanation:
The calculation involves reducing the receivables by both the provision for doubtful debts and provision for discount on receivables.
Provision for doubtful debts: 5% of N90,000 = N4,500
Provision for discount: 2% of (N90,000 – N4,500) = N1,710
Net trade receivables = N90,000 – N4,500 – N1,710 = N83,790

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