Can anyone solve this question??? (Adjusting Entries for Trading and P/L account)
On 1st January,1990, the Bad Debts Reserve appeared in the books of a firm at a figure of Rs.500. During the year Bad Debts amounted to Rs. 400 and Sundry Debtors to Rs. 15000. On 31st December 1990 a 5 per cent reserve for doubtful debts was maintained on sundry debtors. During the year 1991 Bad Debts amounted to Rs. 1000 and Sundry Debtors to Rs..20000. On 31st December, 1991, the Reserve for Doubtful Debts on Sundry Debtors was increased by 5 per cent and a 2.5 per cent reserve was maintained for discount on Debtors.
Required: Give necessary Journal Entries.
I am just confused about the bold statement and its entry.