Question

Debtors appearing in the Balance Sheet of a firm were as follows: 
Liabilities                ₹ 
Sundry Debtors        4,00,000 
Less: Provision          15,000 
Assets                      ₹ 
Sundry Debtors         3,85,000 
On Dissolution of firm, bad debts were ₹40,000 and the remaining debtors were realised at 5% discount. How much amount was realised from Debtors? 
 

Hint:

When realising debtors during dissolution, subtract bad debts from the total and apply the discount to the remaining amount.

Answer 1

Step 1: Total Debtors after Provision.
The total amount of debtors as per the balance sheet is ₹4,00,000, less the provision of ₹15,000. Hence, the net amount of debtors is: \[ \text{Net Debtors} = 4,00,000 - 15,000 = 3,85,000 \] Step 2: Bad Debts.
It is given that bad debts amount to ₹40,000. These bad debts will not be realised, so they are excluded from the amount to be realised.
Step 3: Realisation of Remaining Debtors.
The remaining debtors after bad debts are: \[ \text{Remaining Debtors} = 3,85,000 - 40,000 = 3,45,000 \] The remaining debtors are realised at a 5% discount, meaning only 95% of the remaining debtors are realised. Hence, the amount realised from the remaining debtors is: \[ \text{Amount Realised} = 3,45,000 \times 0.95 = 3,27,750 \] Step 4: Total Amount Realised.
The total amount realised from debtors is the sum of the amount realised from the remaining debtors and the amount of bad debts (which were written off). Hence: \[ \text{Total Realised} = 3,27,750 + 40,000 = 3,67,750 \] Step 5: Conclusion.
The total amount realised from debtors is ₹3,67,750.