Question

Arushi, Vivaan and Mitali were partners in a firm. On 31st March 2024, the firm was dissolved. On that date, the firm had debtors of \( ₹ 60,000 \) and provision for doubtful debts of \( ₹ 3,000 \) were existing in the books. Debtors of \( ₹ 8,000 \) proved bad and full amount was realised from the remaining debtors. The amount realised from debtors was:

• A. \( ₹ 60,000 \)
• B. \( ₹ 55,000 \)
• C. \( ₹ 52,000 \)
• D. \( ₹ 49,000 \)

Hint:

While calculating realisable amount, subtract only actual bad debts from total debtors. Provision is non-cash and already adjusted.

Answer 1

The Correct Option is C

The objective is to determine the net amount recoverable from debtors, considering actual bad debts. The company's initial debtor balance is ₹60,000. A portion of these debtors has been identified as uncollectible. An existing provision for doubtful debts is also on record.

The following procedure outlines the calculation of the realizable amount:

• Step 1: Identify actual bad debts. From the total debtors of ₹60,000, ₹8,000 are confirmed as irrecoverable.
• Step 2: Calculate the net realizable value. Subtract the confirmed bad debts from the gross debtors: \(₹60,000 - ₹8,000 = ₹52,000\).
• Step 3: Address the provision for doubtful debts. The existing provision of ₹3,000 does not alter the actual cash collectible. It serves as an accounting mechanism for anticipated losses, which are now superseded by the confirmed ₹8,000 in bad debts.

Consequently, the net amount realized from debtors after accounting for bad debts amounts to ₹52,000.