JAMB Accounting Past Questions & Answers - Page 155

The business owner made a provision of 500 as bad debt. Total debt owed was 20,000. At the end of the period, bad debts was 4%. Hence we have; 

4% x 20000
0.04 x 20000 = 800

we subtract the total bad debt from the amount that was initially provided for bad debt and charge it to the profit and loss account as a expense

Provision for bad debts = 500
800 - 500 = 300

No explanation has been provided for this answer.

sales                                                        10900
- Returns inwards                                      600
-carriage outwards                                    300   
                                                                10000 
opening stock           1000
purchase                  4000
- returns outwards      800         3200      
+ carriage inwards                     200
goods avail. for sale                  4400

less; closing stock     2000
carriage outwards      300        2300          2100
Gross profit                                                7900 

sales                                                        10900
- Returns inwards                                      600
-carriage outwards                                    300   
                                                                10000 
opening stock           1000
purchase                  4000
- returns outwards      800         3200      
+ carriage inwards                     200
goods avail. for sale                  4400

less; closing stock     2000
carriage outwards      300        2300          2100
Gross profit                                                7900                                        

Uncredited cheques: These are cheques received from customers and other sources for which the firm has banked but the bank has not yet availed the funds by crediting the firm's account. In this case, the cash book balance will be more than the bank balance.