With the help of following information calculate provisions for bad and doubtful debts Debtors M: Rs. 3,200 Bad to be written off Debtors N: Rs. 8,000 expeected to realise only 70% Debtors O: Rs. 6,000 expected to realise only 60% Debtors P: Rs. 4,000 financial condition very poor, no recovery is likely

Answer: Option B

Interpretation

The phrase “provision for bad and doubtful debts” requires recognising the entire expected loss from debtors: amounts already identified as bad (to be written off) plus the doubtful portions that are not expected to be recovered

Loss computation debtor-wise

Debtor M: ₹3,200 is bad ⇒ 100% loss = ₹3,200

Debtor N: Expected to realise 70% of ₹8,000 ⇒ loss = 30% × 8,000 = ₹2,400

Debtor O: Expected to realise 60% of ₹6,000 ⇒ loss = 40% × 6,000 = ₹2,400

Debtor P: Financial condition very poor, no recovery ⇒ 100% loss = ₹4,000

Total provision (bad + doubtful)

₹3,200 + ₹2,400 + ₹2,400 + ₹4,000 = ₹12,000

Note

If the requirement were only for a provision against doubtful debts (excluding specific bad debts already written off), it would be ₹2,400 + ₹2,400 = ₹4,800. However, the wording includes both bad and doubtful, so the correct option is ₹12,000