To determine the amount for sundry debtors after accounting for the provision for bad and doubtful debts, we need to follow a systematic approach. Let's break this down step-by-step.
Step 1: Understanding Sundry Debtors and Provisions
- Sundry Debtors: This refers to the amounts owed to the business by customers for goods or services provided on credit. In this case, the total sundry debtors amount to #800,000.
- Provision for Bad and Doubtful Debts: This is an estimate of the amount of debt that may not be collectible. It is a precautionary measure to account for potential losses from customers who may default on their payments.
Step 2: Calculating the Provision
To find the amount of sundry debtors after the provision, we need to know the amount of the provision for bad and doubtful debts. However, the question does not provide this amount directly.
Step 3: Analyzing the Options
The options provided are:
- A. #744,800
- B. #760,000
- C. #784,000
- D. #744,000
Step 4: Determining the Correct Option
To find the correct option, we need to calculate the sundry debtors after the provision. The formula to calculate the net sundry debtors after provision is:
[
\text{Net Sundry Debtors} = \text{Total Sundry Debtors} - \text{Provision for Bad and Doubtful Debts}
]
Given that the total sundry debtors are #800,000, we need to find the provision amount that leads us to one of the options.
Step 5: Testing Each Option
- Option A: #744,800
- Calculation:
[
\text{Provision} = 800,000 - 744,800 = 55,200
]
-
This means the provision would be #55,200.
-
Option B: #760,000
- Calculation:
[
\text{Provision} = 800,000 - 760,000 = 40,000
]
-
This means the provision would be #40,000.
-
Option C: #784,000
- Calculation:
[
\text{Provision} = 800,000 - 784,000 = 16,000
]
-
This means the provision would be #16,000.
-
Option D: #744,000
- Calculation:
[
\text{Provision} = 800,000 - 744,000 = 56,000
]
- This means the provision would be #56,000.
Step 6: Identifying the Correct Answer
Now, we need to determine which provision amount is reasonable based on common practices. Typically, provisions for bad debts can vary based on the company's credit policies, historical data, and industry standards.
- Option D (#744,000) indicates a provision of #56,000, which is a reasonable estimate for bad debts in many businesses, especially if they have a history of some defaults.
Conclusion
The correct answer is
D. #744,000 because it reflects a reasonable provision for bad debts, leaving a net amount of sundry debtors that is consistent with typical accounting practices.
Summary
- Sundry debtors are amounts owed by customers; in this case, #800,000.
- A provision for bad debts is deducted from total sundry debtors to reflect potential losses.
- The correct calculation leads to a net sundry debtor amount of #744,000 after a provision of #56,000.
- Option D is the most reasonable choice based on typical accounting practices for provisions.
Revision Points
- Understand the concept of sundry debtors and provisions for bad debts.
- Use the formula: Net Sundry Debtors = Total Sundry Debtors - Provision for Bad Debts.
- Analyze each option carefully to determine the most reasonable provision amount.
- Remember that provisions are estimates and can vary based on historical data and industry standards.