Transactions for the Financial Year 2017-18

S.N. Impact on Assets Impact on Liabilities Impact on Shareholders' Equity

1 Accounts Receivable 17,490,000 Retained Earnings 17,490,000
(on account of Sales Revenue)

2 Cash 16,770,000
Accounts Receivable (16,770,000)

3 Accounts Receivable (48,800)

Less: Prov for Bad Debts (48,800)

4 Accounts Receivable - Retained Earnings (61,048)

Less: Prov for Bad Debts (61,048) (on account of Bad Debt Expense)

Calculation
Receivables
Balance at the beginning of the year 1,540,000
Net additions during the year 671,200 (1) + (2) + (3)
Receivables at the end of the year 2,211,200

Provision for bad debt

Balance at the end of the year 88,448 4% of Accounts receivable
Add back provision written-of 48,800 Add back (3)
less Bal at the beginning of the year 76,200
Provision created during the year 61,048 Bal at end = Bal at beg. + Prov created - Prov w/o
=> Prov created = Bal at end + Prov w/o - Bal at beg.

Balances by Account Heads

Accounts Receivable Provision for Bad Debt Cash

 Beg Bal 1,540,000 Beg Bal 76,200 Beg Bal 980,000
(1) 17,490,000 (3) (48,800) (2) 16,770,000
(2) (16,770,000) (4) 61,048 Not closed as there would be other
(3) (48,800) 88,448 transactions
2,211,200

Sales Revenue Bad Debt Expense

(1) 17,490,000 (4) 61,048
17,490,000 61,048

Impact on items in Balance Sheet and Income Statement

Disclosure in Balance Sheet as on March 31, 2018

Accounts Receivable 2,211,200
Less: Prov for Bad Debts 88,448 2,122,752

Disclosure in Income Statement for Year ended March 31, 2018

Bad Debt Expense 61,048
Notes
On asset side A/R increases; on
other side R.E. increases with sales

On asset side Cash increases & A/R

decreases

Both A/R on asset side & provn for

bad debt (contra-asset) is reduced
No net impact on B.S. or I.S.
On L&OE side, bad debt expense
reduces profit hence R.E., increase in provision
reduces net A/R (for amount see calculation)
Journal (Transactions for the Financial Year 2017-18)
S.N. Account Head Debit
1 Accounts Receivable 17,490,000
Sales revenues

2 Cash 16,770,000
Accounts Receivable

3 Provision for Bad Debts 48,800

Accounts Receivable

4 Bad Debt Expense 61,048

Provision for Bad Debts

Calculation
Receivables
Balance at the beginning of the year 1,540,000
Net additions during the year 671,200
Receivables at the end of the year 2,211,200

Provision for bad debt

Balance at the end of the year 88,448
Add back provision written-of 48,800
less Bal at the beginning of the year 76,200
Provision created during the year 61,048

Ledger (T-Accounts)
Permanent Accounts (Balance transferred to Balance Sheet)
Accounts Receivable
Beg Bal 1,540,000 16,770,000 (2)
(1) 17,490,000 48,800 (3)
Bal 2,211,200

Temporary Accounts (Balance transferred to Income Statement)

Cash
Beg Bal 980,000
(2) 16,770,000
(not closed, there would be other transactions)

Sales Revenue
17490000 (1)
To I.S. 17,490,000
0
Impact on items in Balance Sheet and Income Statement
Disclosure in Balance Sheet as on March 31, 2018
Accounts Receivable 2,211,200
Less: Provision for Bad Debts 88,448

Disclosure in Income Statement for Year ended March 31, 2018

Bad Debt Expense 61,048
 Credit Notes
On asset side A/R increases; on
17,490,000 other side R.E. increases with sales

On asset side Cash increases & A/R

16,770,000 decreases

Both A/R on asset side & provn for

48,800 bad debt (contra-asset) is reduced
No net impact on B.S. or I.S.
On L&OE side, bad debt expense
61,048 reduces RE (I.S.), contra-asset is
reduced (for amount see calculation)

(1) + (2) + (3)

4% of Accounts receivable
Add back (3)

Bal at end = Bal at beg. + Prov created - Prov w/o

=> Prov created = Bal at end + Prov w/o - Bal at beg.

Provision for Bad Debt

(3) 48,800 76,200 Beg Bal
61,048 (4)
88,448 Bal

Bad Debt Expense

(4) 61,048
61,048 To I.S.
0
 2,122,752

ended March 31, 2018