Comprehension Passage
Following is the Balance Sheet of Supriya and Monika as on March 31, 2020:
Balance Sheet of Supriya and Monika as on March 31, 2020
| Liabilities | Amount (Rs.) |
|---|---|
| Supriya's Capital | 32,500 |
| Monika's Capital | 11,500 |
| Sundry Creditors | 48,000 |
| General Reserve | 13,500 |
| Total | 1,05,500 |
| Assets | Amount (Rs.) |
|---|---|
| Cash and Bank | 40,500 |
| Stock | 7,500 |
| Sundry Debtors | 21,500 |
| Less: Provision for doubtful debts | 500 |
| Fixed Assets | 36,500 |
| Total | 1,05,500 |
The firm was dissolved on March 31, 2020. Close the books of the firm with the following information:
(i) Debtors realised at a discount of 5%,
(ii) Stock realised at Rs.7,000,
(iii) Fixed assets realised at Rs.42,000,
(iv) Realisation expenses of Rs.1,500,
(v) Creditors are paid in full.
In the dissolution of the firm, a provision of Rs. 500 for doubtful debts is made. Which of the following reflects the effect of this provision on the final accounts?
1
The provision reduces the total value of debtors
2
The provision increases the total value of debtors
3
The provision is added to the creditors’ account
4
The provision is transferred to the capital accounts