JAMB Accounts Principles of Accounts 2010 Paper

Concept:The provision for bad debts is the amount set aside based on a given percentage of sundry debtors.Explanation:Sundry debtors $= \mathrm{N}20,000$.Required provision rate $= 4\%$.So, provision for bad debts $= 4\% \times \mathrm{N}20,000$.This equals $\frac{4}{100} \times 20,000 = 800$.The existing provision of $\mathrm{N}500$ is the opening balance; it is not deducted when computing the required provision.Therefore, the required provision for bad debts is $\mathrm{N}800$.Answer:Option B: $\mathrm{N}800$